高级财务会计 陈信元 chapter 2

2019/9/261Chapter2AccountingforStockInvestmentadditionalreadings:CASNo.21.FairValue/CostMethodandEquityMethod11.Fairvalue/Costmethod1)characteristicsrecordsaninvestmentatcostrecognizesdividendinexcessofearningsareconsideredasareturnofinvestment(reductionofinvestment)2)conditionsforcostmethodnoabilitytoinfluence:20%ownershiptestIfthestockismarketable,theinvestmentshouldbeaccountedforatfairvalue2019/9/26212.Equitymethod1)characteristicsinitiallyrecordsaninvestmentatcostrecognizestheshareoftheinvestee’searningsasincomedividendsreceivedreducethecarryingamountoftheinvestmentadjuststheinvestmentaccounttorecognizetheshareoftheinvestee’searningsafterthedateofacquisition,by*eliminatingunrealizedgainsandlosses*amortizingtheFMV-BVdifferentialincompleteequitymethodvs.equitymethodnote:equitymethodgoodwillshallnotbetestedforimpairment.2019/9/2632)conditionsforequitymethodsignificantinfluenceoverthefinancialandoperatingpoliciesoftheinvestee,indicatedby*representationontheboardofdirectors*participationinpolicymakingprocesses*materialintercompanytransaction*interchangeofmanagerialpersonnel*technologicaldependency20~50%ownership(US)controlthefinancialandoperatingpoliciesoftheinvestee:over50%ownershipifnoinfluenceorcontrol,evenmorethan20%or50%ownershipinterestheld,onlycostmethodisused13.Comparisonofcostmethodtoequitymethod2019/9/264percentageofoutstandingvotingstockacquired0%20%50%100%1.levelofeconomicinfluence|←nominal→|←sig.influence→|←control→|2.valuationbasis|←costm.→|←equitymethod→|3.balancesheetpresentation|←investmentaccount→|←CFS→|illustration(P46-47)2.EquityMethod(One-lineConsolidation)21.Equitymethodandfullconsolidation1)one-lineconsolidationinvestmentaccountisreportedinasingleamountononelineoftheinvestor’sB/S2019/9/265investmentincomeisreportedinasingleamountononelineoftheinvestor’sI/S2)exceptionsforone-lineconsolidationextraordinaryitemscumulativeeffectofanaccountingchangeeffectofdiscontinuedoperationspriorperiodadjustmentillustration:p.57-583)fullconsolidationinvestmentaccountisreplacedbyinvestee’sassetsandliabilitiesinconsolidatedB/Sinvestmentincomeisreplacedbyinvestee’srevenueandexpensesinconsolidatedI/SP’sincomeandowner’sequityunderequitymethodareassameasthoseintheCFS2019/9/2664)illustrationassumptions*nocost-BVdifferential*nointercompanytransactionTable2-1:BalanceSheetP(equitym)S(80%)ConsolidatedE.Otherassets520200720InvestmentinS80----totalassets600200720Liabilities100100200Minorityinterest----20Owner’sequity500100500totalequity6002007202019/9/267Table2-2:IncomeStatementP(ex.S)S(80%)P(e.m)C.E.Sales10030100130Costofsales50105060Grossprofit50205070Otherexpenses20102030Operatingincome30103040IncomefromS----8--IncomebeforeMII------40MIincome------(2)Netincome30103838thedifferencebetweenthetwoproceduresstemsfrom*consolidatedstatementsfocusoneconomicentity*equitymethodfocusesonparent(investor)company2019/9/26822.Applicationoftheequitymethod1)equitymethodatacquisitionvaluation:FMVofconsiderationsgivenupequitysecuritiesexchange:registrationandissuancecostsarechargedagainstadd’lPICotherdirectcostsareaddedtotheacquisitioncost2)assignmentandamortizationofcost-BVdifferentialsFMV-BVdifferential:beassignedtorelatedassetsandliabilitiescost-FMVdifferential:goodwillornegativegoodwillifBVcost,checkwhetherassetsareovervaluedexamples:p.48~532019/9/2693)disclosuresforequityinvesteesthenameofeachinvesteeandownershippercentageaccountingpoliciesofstockinvestmentcost-BVdifferentialandaccountingforthedifferentialrelatedpartytransactions(p.58-60)otherimportantinformation3.InterimAcquisitionofanInvestmentInterest31.Determinationoftheunderlyingequity1)investee’sstockholder’sequity=beginningbalance+incomeearnedfromyearbeginningtoacquisitiondate-dividendsdeclaredduringtheperiodunderlyingequity=investee’sstockholder’sequity×%2019/9/26102)basicassumptioninvestee’sincomeisearnedevenlythru.theyear32.Determinationoftheinvestmentincome1)investmentincome=investee’sincomerealizedfromtheacquisitiondatetotheyearend×%+/-amortizationofFMV-BVdifferential2)example:p.54-5533.Stockpurchasesdirectlyfromtheinvestee1)thenumberofsharesincreaseswheninvestorpurchasesstockdirectlyfromtheinvestee2)interest%=sharesacquired÷totalsharesafteracquisition2019/9/26114.ChangesinOwnershipInterest41.FromcostmethodtoequitymethodPar.19mofAPBopinionNo.18requiresretroactiveapplicationoftheequitymethodofaccountingwhenaninvestor’sownershipinterestreaches20%1)toconverttheinvestmentcosttoanequitybasisinvestee’sundistributedearningsamortizationofFMV-BVdifferential2)example:p.5542.Fromequitymethodtocostmethod1)discontinuationoftheequitymethod2)noadjustmenttoinvestmentcost2019/9/26125.EquityMethodInvestments1)manyoftherulesregardinggoodwillfrombusinesscombinations(parentacquiringacontrollinginterestinasubsidiary)alsoapplytogoodwillarisingfromuseoftheequitymethod2)onenotableexceptionistheruleregardinggoodwillimpairmentsimpairmenttestsforequityinvestmentscontinuetofollowguidancefromAPBOpinionNo.18whichrequireimpairmenttestsbeperformedbasedonfairvalu