5-Inter-corporate Investments 财务报表

5-2
Analysing Investing Activities:
Inter-corporate Investments
05
CHAPTER
5-3
Overviews of Topics
Investment Securities Various types Different methods of recording
as follows:
5-20
Equity Method Accounting
• Important points:
– Investment account reported at an amount equal to the proportionate share of the stockholders’ equity of the investee company. Substantial assets and liabilities may not be recorded on balance sheet unless the investee is consolidated.
5-16
Equity Method Accounting
Required for intercorporate investments in which the investor company can exert significant influence over, but does not control, the investee.
5-10
Investment Securities
Accounting for Investment Securities
ASC 320 and ASC 825 – Significantly alter (changed) the
accounting and reporting of investment securities.
Debt Securities
Equity Securities
5-8
Investment Securities
Composition
What are examples of the two typeurities?
5-9
Investment Securities
not provide for additional losses unless the investor has guaranteed the obligations of the investee or is otherwise committed to providing further financial support to the investee.
5-18
Equity Method Accounting
Equity Method Mechanics
• Assume that Global Corp.
Synergy, Inc.
acquires for cash a 25% interest
in Synergy, Inc. for $500,000, representing one-fourth of Synergy’s stockholders’ equity
5-5
Investment Securities
Analyzing Investment Securities
• Two main objectives:
– To separate operating performance from investing (and financing) performance
5-13
Investment Securities
Composition
5-14
Investment Securities
Accounting for Debt Securities
5-15
Investment Securities
Classification and Accounting for Equity Securities
Current assets PP&E
700,000 5,600,000
as of the acquisition date.
Total assets
6,300,000
• Acquisition entry:
Investment Cash
500,000 500,000
Current liabilities
5-12
Investment Securities
Accounting for Investment Securities
ASC 320 and ASC 825
Prescribes that investment securities be reported on the balance sheet at either – Cost or Fair Market Value. The decision depends on the following: • the type of security •management intend of owning the security •the degree of influence (“control”) over the company.
– To analyze accounting distortions from securities
• Opportunities for gains trading • Liabilities recognized at cost • Inconsistent definition of equity securities • Classification based on intent
dividends of $20,000.
Global records its proportionate share of Synergy’s earnings and the receipt of dividends
Cash 5,000 Investment 5,000
(to record receipt of dividends)
300,000
Long-term debt
4,000,000
Stockholders’ Equity 2,000,000
Total liabs and equity 6,300,000
Equity Method Accounting
5-19
Equity Method Mechanics
• Subsequent to the
• Income:
– Investor reports % share of investee company earnings as “equity earnings” in its income statement
– Dividends are reported as a reduction of the investment account, not as income
Financial Statement Analysis
K.R. Subramanyam
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– Reports the parent’s investment in the subsidiary, and the parent’s share of the subsidiary’s results, as line items in the parent’s financial statements (one-line consolidation
– Investment earnings should be distinguished from core operating earnings (unless strategic).
– Investments are reported at adjusted cost, not at market value. – Should discontinue equity method when investment is reduced to zero and should
Investment 25,000
acquisition date, Synergy Equity earnings 25,000
reports net income of
(to record proportionate share of
$100,000 and pays
investee company earnings)
5-11
Investment Securities
Accounting for Investment Securities
ASC 320 and ASC825
– No longer the traditional lower-of-cost-or-market principle.
– Accounting is determined by its classification.
5-17
Equity Method Accounting
Equity Method Accounting
• Investment account:
– Initially recorded at acquisition cost – Increased by % share of investee earnings – Decreased by dividends received
Equity method of accounting for securities Business Combinations Derivative Securities The Fair Value Option
5-4
Investment Securities
What are the two main reason to Analyzing Marketable Investment securities?
5-6
Investment Securities
Composition
What are the two types of Marketable Investment securities?
5-7
Investment Securities
Composition What are the two types of Marketable Investment securities?
Composition
Investment (marketable) securities: Debt Securities • Government or corporate debt obligations Equity Securities
• Corporate stock that is readily marketable
• Remove all gains (losses) relating to investing activities • Separate operating and nonoperating assets when determining
RNOA (Return on operating assets)
Note: Generally used for investments representing 20 to 50 percent
of the voting stock of a company’s equity securities--main difference between consolidation and equity method accounting rests in the level of detail reported in financial statements