Explain How Investments Are Reported in the Financial Statements

question 68

Essay

Explain how investments are reported in the financial statements. Under IFRS, when a company has a strategic investment in a subsidiary where control has been obtained, the preparation of consolidated financial statements is required. In this case, the investment account is replaced by the specific assets and liabilities of the subsidiary. Under ASPE, parent companies can choose to use consolidation or, if the fair value of the investment is known, the investment can be accounted for using the fair value through profit or loss model or the equity method. If the fair value of the investment is not known, then in addition to consolidating financial statements, the investment can be accounted for using either the cost model or the equity method.Accumulated other comprehensive income is presented in the shareholders' equity section of the statement of financial position. Other comprehensive income is closed out at the end of the year into accumulated other comprehensive income.Changes in share capital, retained earnings, and accumulated comprehensive income are shown in the statement of changes in equity.

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Definitions:

Binocular Cue

Visual information taken in by two eyes that enable a person to perceive depth and 3D characteristics of objects.

Convergence

A binocular cue to depth and distance in which the muscle movements in an individual’s two eyes provide information about how deep and/or far away something is.

Binding

The process of securely attaching two or more items together.

Visual Perception

The process by which the brain interprets and makes sense of visual stimuli or images seen by the eyes.