Ritva Co Purchased a 38% Interest in Saron Ltd on October

question 33

Essay

Ritva Co purchased a 38% interest in Saron Ltd on October 1, 20X9, for $795,000. Management at Ritva is now preparing the first set of financial statements since the acquisition and is unsure of how to report the investment.
A)If Ritva is a publicly traded company following IFRS, can the investment be reported on an equity basis? On a cost basis? At fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes? What would be the impact on net earnings under each method? What is the impact on the investment account under each method?
B)If Ritva is a privately held corporation following ASPE, can the investment be reported on an equity basis? On a cost basis? At fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes?

• A)If Ritva is a publicly traded company following IFRS, can the investment be reported on an equity basis? On a cost basis? At fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes? What would be the impact on net earnings under each method? What is the impact on the investment account under each method?
• B)If Ritva is a privately held corporation following ASPE, can the investment be reported on an equity basis? On a cost basis? At fair market value through profit or loss? Under what circumstances would each of these be appropriate for reporting purposes?

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Definitions:

Organizational Change

Change that a group of people must learn to accept and implement.

Technology Barrier

Obstacles that hinder the adoption, implementation, or effective use of technologies, possibly due to economic, social, or practical reasons.

OD Intervention

Training tools that teach members of the organization how to solve problems they face or make needed changes to organizational development (OD).

Companywide

Pertaining to or affecting all parts of a company, its employees, or its operations, usually in the context of initiatives, policies, or changes.