l2-知識(shí)精講財(cái)報(bào)已跟新章節(jié)

FinancialReportingandAnalysis

2019 Instructor:Jackie&Vivian1Brief

Introduction2Topic

weight:StudySession

1-2Ethics&Professional

Standards10%-15%StudySession

3Quantitative

Analysis5%-10%StudySession

4Economics5%-10%StudySession

5-6FinancialReportingand

Analysis10%-15%StudySession

7-8Corporate

Finance5%-10%StudySession

9-11Equity

Valuation10%-15%StudySession

12-13Fixede10%-15%StudySession

14Derivative

Investment5%-10%StudySession

15Alternative

Investment5%-10%StudySession

16-17Portfolio

Management5%-15%Weights: 100%Contents3Content:StudySession1:FINANCIALREPORTINGANDANALYSIS

(1)Reading14:Intercorporate

Investments★★★Reading15:EmployeeCompensation:Post-EmploymentandShare-Based★★★Reading16:Multinational

Operations★★★Reading17:AnalysisofFinancialInstitutions

★★StudySession2:FINANCIALREPORTINGANDANALYSIS

(2)Reading18.EvaluatingQualityofFinancialReports

★★Reading19:IntegrationofFinancialStatementAnalysis

Techniques★Brief

Introduction4考綱對(duì)比:與2018年相比，2019年FRA的考試權(quán)重調(diào)整為10%

~15%。與2018年相比，2019年的考綱增加了一個(gè)章節(jié)：Reading

17Analysis

of

Financial

Institutions。Brief

Introduction5學(xué)習(xí)建議:財(cái)報(bào)質(zhì)量的考查可能會(huì)穿插一級(jí)財(cái)務(wù)報(bào)告與分析的知識(shí)點(diǎn)，在學(xué)習(xí)二級(jí)新知識(shí)點(diǎn)的同時(shí)應(yīng)適當(dāng)復(fù)習(xí)一級(jí)財(cái)務(wù)報(bào)告與分析的重要知識(shí)點(diǎn)；一定要在理解知識(shí)點(diǎn)的基礎(chǔ)上通過做題達(dá)到熟練運(yùn)用的目的。推薦使用官方教材正文中的例題、課后習(xí)題和官方歷年?？碱}復(fù)習(xí)鞏固知識(shí)點(diǎn)。InvestmentsinFinancialAssetsTasks:Describetheclassification,measurement,anddisclosureunderInternationalFinancialReportingStandards(IFRS)forfinancial

assets.DistinguishbetweenIFRSandUSGAAPintheclassification,measurement,anddisclosureoffinancial

assets.6IntercorporateInvestments

Intercorporate

Investments 7Definitionofintercorporate

investmentsIntercorporateinvestmentsinmarketablesecuritiesarecategorizedas

follows:Investmentsinfinancialassets(hasnosignificant

influence)Investmentsinassociates(hassignificant

influence)Businesscombinations(hascontrolovertheinvestee

firm)Jointventures(therightofcontrolissharedby

entities)

Intercorporate

Investments 8Theclassificationof

categoriesPercentageofownershipistypicallyusedtodetermine

theappropriatecategory.However,theownershippercentageisonlyaguideline.Ultimately,thecategoryisbasedontheinvestor’sability

toinfluenceorcontrolthe

investee.

CategorizationofInvestment FinancialAssetsAssociatesBusinessCombinationJointVenturesDegree

ofinfluenceNo

significantSignificantControlSharedcontrolTypicalpercentageof

interest<20%20%-

50%>50%VariesTermofinvesteeN/AAssociateSubsidiaryN/AAccountingtreatmentHTMAFSFair

valuethroughProfit/LossEquitymethodAcquisitionmethodEquitymethod9

Financial

Assets 10Definitionoffinancial

assetsTheclassificationbelowonlyappliestoequityordebtinvestmentwithnosignificantinfluence(percentageofinterests<20%)

:HTMisonlyfordebt

securitiesAvailableforsalesecurity

(AFS)FairvaluethroughP/L(includingtradingsecurities

&designatedatfair

value)GAAPandIFRSarethesameaboutthe

classification.Financial

Assets11Held-to-maturity

investmentsHeld-to-maturityinvestmentsareinvestmentsinfinancialassetswithfixedordeterminablepaymentsandfixedmaturities(onlydebtsecurities)thattheinvestorhasthepositiveintentandabilitytoholdto

maturity.Financial

Assets12Held-to-maturity

investments(Cont.)Initialrecognition(similarunderIFRS&US

GAAP)IFRS:recognizedatfair

value.USGAAP:recognizedatinitialprice

paid.Held-to-maturitysecuritiesarereportedonthebalance

sheetatamortized

cost.Amortizedcostissimplythepresentvalueof

theremainingcashflow(coupon&face

value).

Financial

Assets 13FairvaluethroughprofitandlossHeld-for-tradingsecurities(Equity&Debt)Securitiesacquiredwiththeintendtoselltheminthenearterm.(usuallylessthan3months)Reportedonthebalancesheetatfairvalue.Bothrealizedandunrealizedgainandlossarerecognizedintheestatement.DesignatedatfairvalueDesignatingfinancialassetsatfairvalueregardlesstheholdingintention.Thetreatmentissimilartothatoftradingsecurities.Financial

AssetsAvailableforsalesecuritiesNotclassifiedasheldtomaturityandfairvaluethroughprofitandlosssecurities.Availableforsalesecuritiesarereportedonthebalancesheetatfairvalue.Realizedgainandlossarerecognizedonestatement.Unrealizedgainandlossarerecognizedonequity(OCI).Accountingtreatmentofavailableforsalesecuritieswhenforeignexchangerateischanging.Next

slide14

AvailableforSale

Securities 15ForeignexchangeratechangesDebt:USGAAP:AllchangeinfairvalueofavailableforsaleinvestmentsisrecognizedinOCI.IFRS:Recognizeforeignexchangegainorlossinestatement.RecognizeotherchangesinfairvalueinOCI.Equity: RecognizeallchangesoffairvalueinOCI.(BothUSGAAPandIFRS)

SummaryofClassificationofFinancial

Assets16Held-to-MaturityFairvalue

throughprofitor

lossAvailable-for-SaleBalanceSheetAmortized

costFair

valueFairvalueUnrealizedG/L(OCI-Equity)eStatementInterest(includingamortization)Realized

G/LInterest

&DividendsRealized

G/LUnrealized

G/LInterest

&DividendsRealized

G/LAccountingForHTMBondsata

DiscountLedesmaCorpboughta3-year$1,000parvaluebondwithanannualcouponof10%at$951.96.Theeffectiveinterestrate,whichequateswiththemarketinterestrate,is

12%.17Asset

onBSInteresteCouponReceivedInterestAmortisationYear

1951.96114.2410014.24Year

2966.20115.9410015.94Year

3982.14117.8610017.86Bond1,000redemption

Example

Example 18AccountingForHTMBondsata

PremiumIlliquidCorporationboughta3-year$1,000parvaluebondwithacouponof20%at$1,131.Theeffectiveinterestrate,whichequateswiththemarketinterestrate,is

14.33%.Asset

onBSInteresteCouponReceivedInterestAmortisationYear

11,130.88162.05200-37.94Year

21,092.93156.62200-43.39Year

31,049.55150.40200-49.60Bond1,000redemption

Example 19Acompanypurchaseda9%bondwithafacevalueof$100,000for

$96,209toyield10%.Thecouponpaymentsaremadeannuallyatyearend.Thefairvalueofthebondattheendoftheyearis

$98,500.Determinetheimpactonthefirm’sB/SandI/Sifthebondinvestmentisclassifiedasheld-to-maturity,fairvaluethroughprofitorlossandavailable-for-sale.

Example 20Held-to-maturityThebalancesheetvalueisbasedonamortizedcost.Atyear-end,thecompanyrecognizesinterestrevenueof$9,621($96,209×10%).---estatementAtyear-end,thebondisreportedonthebalancesheetat$96,830($96,209+$9,621-$9,000).---BalancesheetFairvaluethroughprofitandlossThebalancesheetvalueisbasedonfairvalueof$98,500.Atyear-end,thecompanyrecognizesinterestrevenueof$9,621($96,209×10%).---estatementTheunrealizedgainof$1,670($98,500-$96,209-$621)arerecognizedintheestatement.21

Example ExampleAvailableforsaleThebalancesheetvalueisbasedonfairvalueof$98,500.Atyear-end,thecompanyrecognizesinterestrevenueof$9,621($96,209×10%).---estatementTheunrealizedgainof$1,670($98,500-$96,209-$621)arerecognizedinothercomprehensivee.(OCI)22Importance:

☆☆Content:Theclassification,measurementoffinancialassetsunderbothIFRSandUS

GAAP.Examtips:定性、定量掌握Financial

Assets的初始確認(rèn)的原則、后續(xù)計(jì)量的方法。掌握IFRS和US

GAAP對(duì)Financial

Assets計(jì)量的異同點(diǎn)。23SummaryReclassificationofFinancial

AssetsTasks:Describethemeasurement(reclassification)ofinvestmentsinfinancialassetsunder

IFRS.DistinguishbetweenIFRSandUSGAAPinmeasurement(reclassification)ofinvestmentsinfinancial

assets.24IntercorporateInvestments

ReclassificationofFinancial

Assets25IFRSIFRStypicallydoesnotallowreclassificationofinvestmentsintooroutofthedesignatedatfairvalue

category.Reclassificationofinvestmentsoutofthe

held-to-tradingcategoryisseverelyrestrictedunder

IFRS.

ReclassificationofFinancial

Assets26IFRS

(Conts)Debtsecuritiesinitiallydesignatedasavailable-for-salemaybereclassifiedtoheld-to-maturityifachangeinintentionorabilityhas

occurred.Held-to-maturitysecuritiescanbereclassifiedasavailable-for-saleiftheholdernolongerintendsorisnolongerableto

holdthedebtto

maturity.

ReclassificationofFinancial

Assets27U.S.

GAAPU.S.GAAPallowsreclassificationsofsecuritiesbetweenallcategorieswhen

justified.Fairvalueofthesecurityisdeterminedatthedateof

transfer.Thetreatmentofunrealizedholdinggainsandlossesonthetransferdatedependsontheinitialclassificationofthesecurity.

Summary-

IFRS TransferfromTransfer

toAccounting

TreatmentDesignated

atfair

valueAnytypeofInvestmentsProhibitedHold-for-TradingAnytypeofInvestmentsSeverely

restrictedHold-to-MaturityAvailable-for-SaleRemeasureatfairvalueattransferdate,differencebetweencarryingvalueandfairvaluereportedin

O.C.I.Available-for-Sale

(Debt)Hold-to-MaturityRemeasureatfairvalueattransferdateasamortized

cost.O.C.I.bal.anddifferencebetweenamortizedcostandmaturityvalueshouldamortizedinI/Sduringremaininglifeofdebtsusingtheeffectiveinterest

method.28Summary–US

GAAP29Transfer

fromTransfer

toAccounting

TreatmentHold-for-TradingAvailable-for-SaleUnrealizedG/L(differencebetweencarryingvalueandcurrentfairvalue)shouldbereportedin

I/S.Available-for-SaleHold-for-TradingAccumulatedamountinOCIshould

berecognizedinI/Sonthedateof

transfer.Hold-to-MaturityAvailable-for-SaleUnrealizedG/L(differencebetween

fairvalueandamortizedcost)reportedin

O.C.I.Available-for-Sale

(Debt)Hold-to-MaturityAccumulatedamountinOCIshouldbeamortizedoverremaininglifeofthesecurityasanadj.ofinteresteasthesamemanneraspremiumordiscount.Importance:

☆☆Content:ThetreatmentofreclassificationofinvestmentsinfinancialassetsunderbothIFRSandUS

GAAP.Examtips:定性掌握IFRS和US

GAAP對(duì)于Investment

in

Financial

Assets重分類的計(jì)量方法。30

Summary ImpairmentofFinancial

AssetsTasks:Describethemeasurement(impairment)ofinvestmentsinfinancialassetsunder

IFRS.DistinguishbetweenIFRSandUSGAAPinmeasurement(impairment)ofinvestmentsinfinancialassets.31IntercorporateInvestmentsImpairmentofFinancialAsset32BothU.S.GAAPandIFRSU.S.GAAPandIFRSrequirethatheldtomaturityandavailableforsalesecuritiesbeevaluatedforimpairmentateachreportingperiod.It’snotnecessaryforfairvaluethroughprofitandlosssecuritiesbecausedeclinesintheirvaluearerecognizedontheestatementastheyoccur.

ImpairmentofFinancial

Asset 33UnderIFRS(Impair

indication)Fordebtsecurity,impairmentisindicatedifatleastonelosseventshasoccurred,anditseffectonthesecurity’sfuturecashflowscanbeestimated

reliably.Lossesduetooccurrencesoffutureevents(regardlessoftheprobabilityofoccurrence)arenotrecognized.ImpairmentofFinancialAssetUnderIFRS(Impairindication)Forthedebtsecurity,thelosseventsareincluding:Theissuerexperiencessignificantfinancialdifficulty;Defaultordelinquencyininterestorprincipalpayments;Theborrowerencountersfinancialdifficultyandreceivesaconcessionfromthelenderasaresult;andItesprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganization.34

ImpairmentofFinancial

Asset 35UnderIFRS(Impair

indication)Forthedebtsecurity,thefollowingeventsarenotbyitselfevidenceof

impairment:Thelackofanactive

market;Adowngradeofanentity’screditratingoradeclineinfairvalueofasecuritybelowitscostor

amortizedcost.

ImpairmentofFinancial

Asset 36UnderIFRS(Impair

indication)Fortheequitysecurity,impairmentisindicatedifatleastonelosseventshas

occurred:Significantchangesinthetechnological,market,economic,and/orlegalenvironmentsthatadverselyaffecttheinvesteeandindicatethattheinitialcostoftheequityinvestmentmaynotbe

recovered.A

significant

orprolonged

(持續(xù)性的)decline

inthefairvalueofanequityinvestmentbelowits

cost.

ImpairmentofFinancial

Asset 37UnderIFRS(Measurementofimpairment)ImpairmentofheldtomaturitysecuritiesImpairedifitscarryingvalue>PVofcashflow(expectedpermanently)Impairmentlossisrecognizedonestatement.ReversalIftherecoverycanbeattributedtoanevent(eg:creditupgrade),theimpairmentlosscanbereversed.

ImpairmentofFinancial

Asset UnderIFRS(Measurementof

impairment)ImpairmentofavailableforsalesecuritiesImpairedifitscarryingvalue>fairvalueImpairmentlossisrecognizedonestatement.ReversalImpairmentlossesonAFSdebtsecuritiescanbereversedifasubsequentincreaseinfairvaluecanbeobjectivelyrelatedtoaneventoccurringaftertheimpairmentlosswasrecognizedinprofitorloss.ImpairmentlossesonAFSequitysecuritiescannotbereversedthroughprofitorloss.38

ImpairmentofFinancial

Asset 39UnderIFRS(Measurementofimpairment)ImpairmentofavailableforsalesecuritiesCumulativelossinOCIisreclassifiedtoestatement.Cumulativeloss=Acquisitioncost–currentfairvalue–impairmentlossthathaspreviouslybeenrecognizedinestatement.

ImpairmentofFinancial

Asset 40UnderU.S.GAAPAsecurityisconsideredimpairedifitsdeclineinvalueisdeterminedtobeotherthantemporary.Forbothheldtomaturityandavailableforsalesecurities,thewritedowntofairvalueistreatedasarealizedloss.(recognizedontheestatement).Asubsequentreversalofimpairmentlossesisnotallowed.ForASFsecurities(bothdebtandequity),subsequentchangesinfairvaluearetreatedasunrealizedgainsorlossesandincludedinOCI.Importance:

☆☆Content:ThetreatmentofimpairmentofinvestmentsinfinancialassetsunderbothIFRSandUS

GAAP.Examtips:掌握IFRS和USGAAP對(duì)于Investment

in

Financial

Assets重分類的計(jì)量方法。41

Summary InvestmentinFinancialAssets:IFRS

942Tasks:Describetheclassification,measurementandreclassificationofinvestmentinfinancialassetsunderIFRS

9.IntercorporateInvestments

IFRS9(New

Standards) 43IFRS9(NewStandards)IFRS9doesawaywiththetermsheldfortrading,availableforsale,andheldtomaturity.Instead,thethreeclassificationsare:AmortizedcostFairvaluethroughprofitorloss(FVPL)Fairvaluethroughothercomprehensivee(FVOCI).

IFRS9(New

Standards) 44IFRS9(New

Standards)Amortizedcost(Debtonly),2

criteria:Businessmodeltest:Debtsecuritiesarebeingheldtocollectcontractualcash

flow.Cashflowcharacteristictest:Thecontractualcashflowsaresolelypaymentsofprincipalandinterest

onprincipal.

IFRS9(New

Standards) 45IFRS9(New

Standards)FVPL(Debt&

Equity)Debt:Heldfortradingorifrecognizedasamortizedcostwillresultsinanaccounting

mismatch.Equity:HeldfortradingmustbeclassifiedasFVPL;OthersmaybeclassifiedaseitherFVPLor

FVOCI,irrevocable.FVOCI(Debt&Equity)Sameasavailableforsale

securities.

SummaryofIFRS

9 46Importance:

☆Content:IFRS

9對(duì)Financial

Assets的分類標(biāo)準(zhǔn)和計(jì)量方法。Examtips:主要考查定性的概念及辨析。47

Summary Investmentin

AssociatesTasks:Describetheclassification,measurement,anddisclosureunderInternationalFinancialReportingStandards(IFRS)forInvestmentin

Associates.DistinguishbetweenIFRSandUSGAAPintheclassification,measurement,anddisclosureofInvestmentin

Associates.48IntercorporateInvestments

Definitionof

Associates 49Definitionof

AssociateWhenacompanyholds20%-50%ofthevotingrightsof

anassociate,itispresumedthatthecompanyhassignificantinfluence,butnotcontrol,overtheinvestee’sbusiness

activities.Representationontheboardof

directorsParticipationinthepolicy-making

processMaterialtransactionsbetweentheinvestorandthe

investeeInterchangeofmanagerial

personnelTechnological

dependency

Equity

Method EquityMethodofAccountingTheequityinvestmentisinitiallyrecordedontheinvestor’sbalancesheetatcost.Insubsequentperiods,thecarryingamountoftheinvestmentisadjustedtorecognizetheinvestor’sproportionateshareoftheinvestee’searningsorlosses,andtheseearningsorlossesarereportedine.DividendsorotherdistributionsreceivedfromtheinvesteearetreatedasareturnofcapitalandreducethecarryingamountoftheinvestmentandnotreportedintheI/S.One–lineconsolidation.50

Equity

Method Equity

Method的會(huì)計(jì)處理 – 規(guī)律表：Ref.ItemsB/S-

InvestmentI/S-Equity

Earning1Purchase

PriceCash ;

InvN/A2%

DividendCash ;

InvN/A3%NeteInv4%Depreciation

=(FV-BV)/NInv5%RPTUnrealized

ProfitInv51

Example EquityMethodofAccountingDecember31,20X5,CompanyAinvests$1,000inreturnfor30%ofthecommonsharesofCompanyB.During20X6,CompanyBearns$400andpaysdividendsof$100.CalculatetheeffectsoftheinvestmentonCompanyA’sbalancesheet,estatementandcashflowfor20X6.52

Example EquityMethodofAccounting(Answer)Recognize$120($400×30%)intheI/SfromitsproportionateshareoftheneteofCompanyB.Increaseitsinvestmentaccountonthebalancesheetby$120to$1,120toreflectitsproportionateshareofthenetassetsofB.Receive$30($100×30%)incashdividendsfromCompanyBandreduceitsinvestmentinCompanyBbythatamounttoreflectthedeclineinthenetassetsofCompanyBduetothedividendpayment.Attheendof20X6,thebookvalueoftheinvestmentonCompanyA’sB/S=$1,000+$120-$30=$1,09053InvestmentCostsThatExceedtheBookValueoftheInvesteeAcquisitioncostisinitiallyrecognizedasinvestmentinassociate,andcomprisesoftwoparts:Fairvalueofthenetassetsacquired.Goodwill(Notamortizedbutneedtotestforimpairment)ThedifferencebetweenfairvalueandbookvalueofthenetassetsacquiredwilladjusttheI/Sofinvestor’sequitye.Notsimplyequalstotheneteearnedbyinvesteemultipliedbypercentageofinterestsowned.54

Equity

Method

Equity

Method InvestmentCostsThatExceedtheBookValueofthe

InvesteeGoodwillisrenewedforimpairmentonaregularbasis.Thispartisamortizedtotheinvestee’sprofitorlossovereconomic

lives.55

Example InvestmentCostsThatExceedtheBookValueoftheInvesteeAtthebeginningoftheyear,ACompanypurchased30%ofBCompanyfor$80,000.NetassetofcompanyBinbookvalueis$200,000.Ontheacquisitiondate,thebookvalueofB’sassetsandliabilitieswerethesameexceptforB’sequipment,whichhadabookvalueof$25,000andafairvalueof$75,000ontheacquisitiondate.B’sequipmentisdepreciatedovertenyearsusingthestraight–linemethod.Attheendoftheyear,Breportedneteof$100,000andpaiddividendsof$60,000.56

Example 57QuestionA:Calculatethe

goodwillGoodwill=Purchaseprice–Fairvalueofthenet

assets=Purchaseprice–(Bookvalueofthenetassets+Appreciationofthe

equipment)=$80,000–[$200,000x30%+($75,000FV-$25,000

BV)x

30%]=$5,000QuestionB:CalculateCompanyA’sequityeattheendoftheyearfromitsinvestmentinCompanyB.Equitye=ProportionateshareofB’snete–AdditionaldepreciationfromexcessofpurchasepriceallocatedtoB’sequipment.Equitye=($100,000x30%)–(Excess/10)=$28,500Excess=($75,000-$25,000)x30%=$15,00058

Example QuestionC:CalculatetheinvestmentinCompanyBthatappearsonCompanyA’syear-endbalancesheet.Investmentbalanceatendofyear=Investmentbalanceatbeginningofyear+Equitye–DividendspayoutInvestment=$80,000+$28,500(Equitye)–($60,000x30%)=$90,50059

Example

FairValue

Option 60BothIFRSandUSGAAPgivetheinvestortheoptiontoaccountfortheirequitymethodinvestmentatfair

value.Bothstandardsrequirethattheelectiontousethefairvalueoptionoccuratthetimeofinitialrecognitionandisirrevocable.Theinvestmentisreportedatfairvaluewithunrealizedgainsandlossesarisingfromchangesinfairvalueaswellasanyinterestanddividendsreceivedincludedintheinvestor’sprofitor

loss.

FairValue

Option 61BothIFRSandUSGAAPgivetheinvestortheoptiontoaccountfortheirequitymethodinvestmentatfairvalue.

(Cont.)Underthefairvaluemethod,theinvestmentaccount

ontheinvestor’sbalancesheetdoesnotreflect

theinvestor’sproportionateshareoftheinvestee’sprofit

/lossordividends.Inaddition,theexcessofcostoverthefairvalueoftheinvestee’sidentifiablenetassetsisnotamortized,norisgoodwill

created.Importance:

☆☆☆Content:Theclassification,measurementofinvestmentinassociatesunderbothIFRSandUS

GAAP.EquityMethod

(B/S，I/S的相關(guān)處理)Examtips:定性掌握關(guān)聯(lián)企業(yè)投資的判定標(biāo)準(zhǔn)；定量掌握關(guān)聯(lián)企業(yè)投資的計(jì)量方法——Equity

Method；簡(jiǎn)單了解Fair

Value

Option。62

Summary AdjustmentsofEquity

InvestmentTasks:DescribeandDistinguishtheimpairmentforinvestmentinassociatesunderbothIFRSandUS

GAAP.Describethetransactionswithassociatesunderequitymethodforinvestmentin

associates.63IntercorporateInvestments

ImpairmentofEquity

InvestmentIFRSTheentirecarryingamountoftheinvestmentistestedforimpairmentbycomparingitsrecoverableamountwithitscarryingamount.Recoverableamountofanassetisthehigherofitsvaluelesscoststosellanditsvalueinuse.Theimpairmentlossisrecognizedontheestatement,andthecarryingamountoftheinvestmentonthebalancesheetiseitherreduceddirectlyorthroughtheuseofanallowance

account.64

ImpairmentofEquity

InvestmentUSGAAPIfthefairvalueoftheinvestmentdeclinesbelowitscarryingvalueandthedeclineisdeterminedtobepermanent,animpairmentlosstoberecognizedontheestatementandthecarryingvalueoftheinvestmentonthebalancesheetisreducedtoitsfairvalue.BothUSGAAPandIFRSprohibitthereversalofimpairmentlossesevenifthefairvaluelaterincreases.65

Transactionswith

Associates

Upstream(associatetoinvestor)Theprofitonthepanytransactionisrecordedontheassociate’sestatement.Theinvestor’sshareoftheunrealizedprofitisthusincludedinequityeontheinvestor’sestatement.Investormustreduceitsequityeofinvesteebyinvestor’sproportionateshareoftheunconfirmedprofit.Unconfirmedprofitmeansgoodshavenotbeenusedorsoldbythe

investor.66

ExampleofUpstream

TransactionUpstream(associatetoinvestor)SupposethatInvestorowns30%ofInvestee.Duringtheyear,InvesteesoldgoodstoInvestorandrecognized$15,000ofprofitfromthesale.Atyearend,halfofthegoodspurchasedfromInvesteeremainedinInvestor’sinventory.Investormustreduceitsequityeby$2,250($15,000x50%)x30%=$2,250OncetheinventoryissoldbyInvestor,$2,250ofequityewillberecognized.67

Transactionswith

Associates

68Downstream(investortoassociate)Theinvestorhasrecognizedalloftheprofitinitsestatement.Theinvestormusteliminatetheproportionateshareoftheprofitthatisunconfirmed.

ExampleofDownstream

TransactionDownstream(investortoassociate)SupposethatInvestorowns30%ofInvestee.Duringtheyear,Investorsold$40,000ofgoodstoInvesteefor$50,000.Investeesold90%ofthegoodsbyyear–end.Investor’sprofitis$10,000($50,000sales-$40,000COGS)10%oftheprofitremainsinInvestee’sinventory.Investormustreduceitsequityebytheproportionateshareofunconfirmedprofit:$10,000profitx10%unconfirmedamountx30%=$300OnceInvesteesellstheremaininginventory,Investorcanrecognized$300ofprofit.69

AnalyticalIssuesForEquity

Method70AnalystsshouldquestionwhethertheequitymethodisappropriateSignificantinfluenceornotTherecanbesignificantassetsandliabilitiesoftheinvesteethatarenotreflectedontheinvestor’sbalancesheet,whichwillsignificantlyaffectdebtratios.Netmarginratioscouldbeoverstatedbecauseefortheassociateisincludedininvestornetebutisnotspecificallyincludedinsales.Finally,theanalystmustconsiderthequalityoftheequitymethodearnings.Importance:

☆☆☆Content:Impairment(USGAAP&

IFRS)TransactionswithAssociates(upstream&

downstream)Examtips:掌握Equity

Method減值的計(jì)量方法(IFRS

vs.

US

GAAP)；定量掌握關(guān)聯(lián)企業(yè)上下游交易對(duì)報(bào)表的調(diào)整；重點(diǎn)理解使用Equity

Method對(duì)于B/S

&

I/S以及ratio的影響。71

Summary Business

Combina