Clausen Ltd

question 32

Multiple Choice

Clausen Ltd. has a passive investment in Kaitlin Ltd. Clausen has elected to treat Kaitlin as a fair value through other comprehensive income (OCI) investment under IFRS 9 Financial Instruments. Which of the following statements is TRUE?

• A)Dividends that are a return of capital from Kaitlin are reported as a separate component of Clausen's shareholders' equity.
• B)Year to year changes in the fair value of the Investment in Kaitlin are reported as net income in Clausen's SCI.
• C)Fair value accumulated gains and losses in the Investment in Kaitlin should be reported as a separate component in Clausen's shareholders' equity.
• D)Dividends from Kaitlin are reported as other comprehensive income in Clausen's Statement of Comprehensive Income.

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Definitions:

Variable Costing

An accounting method that assigns only variable production costs to inventory and products; fixed costs are expensed as incurred.

Unit Product Cost

The total cost incurred to produce, purchase, or manufacture one unit of a product, including direct material, direct labor, and manufacturing overhead.

Variable Costing

A financial recording technique that factors in only direct materials, direct labor, and variable manufacturing overhead as part of the product's costing.

Total Gross Margin

The total amount of revenue a company retains after incurring the direct costs associated with producing the goods it sells and the services it provides.