A Friend of Yours,who Is an Accountant for a Large

question 103

Essay

A friend of yours,who is an accountant for a large corporation,asked you to review the financial statements he prepared for the company.In your review you noticed that some short-term investments in the shares of other companies have been reported at historical cost.When you asked your friend about them,he told you these investments were in shares of companies listed on the Toronto Stock Exchange,and that his company planned to sell them in the very near future to help pay liabilities that are coming due.Your friend also stated that these investments are carried at cost because of the historical cost principle required by generally accepted accounting principles.
Explain to your friend in detail exactly how the share investments should have been accounted for.Can you think of a reason ASPE requires the use of a value other than historical cost when this type of investment is presented on the balance sheet?

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