高级财务管理Chap001.ppt
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1、ADVANCED ACCOUNTING,LUO Dianying 2013-2014-1,Main Topics,Equity method of accounting for investment Consolidations Segment reporting Foreign currency Accounting for Government Accounting for Not-for-Profit organization,As the body without the spirit is dead, so faith without deeds is dead. - James,L
2、et your “Yes“ be “Yes“, “No“, “No“.,Let your “Yes“ be “Yes“, “No“, “No“.,4,Email: Tel:1517 1479 861 文泉楼南448室,周一、四上午,Chapter One,The Equity Method of Accounting for Investments,McGraw-Hill/Irwin,Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.,Accounting for Investments in Corpo
3、rate Equity Securities,GAAP recognizes 3 ways to report investments in other companies: Fair-Value Method Consolidation Equity Method,The method selected depends upon the degree of influence the investor has over the investee.,LO 1,1,2,3,1-6,Let your “Yes“ be “Yes“, “No“, “No“.,Fair Value Method,1-7
4、,Investments classified as Trading Securities: Held for sale in the short term. Unrealized holding gains and losses are included in earnings (net income).,Investments classified as Available-for-Sale Securities:可销售证券是不期望在近期出售的的投资证券 Any Securities not classified as Trading. Unrealized holding gains a
5、nd losses are reported in shareholders equity as other comprehensive income (i. e., not included in net income).,Investments in equity securities are recorded at cost and subsequently adjusted to fair value.,1-7,Consolidation of Financial Statements,Required when: Investors ownership exceeds 50% of
6、investee except when control does not rest with the majority investor One set of financial statements prepared to consolidate all accounts of the parent company and all of its controlled subsidiaries AS A SINGLE ENTITY.,1-8,1-8,Let your “Yes“ be “Yes“, “No“, “No“.,Equity Method,Used when: Investor h
7、as the ability to exercise significant influence on the investee operations (whether influence is applied or not) Generally used when ownership is between 20% and 50%. Significant Influence might be present with much lower ownership percentages.,1-9,LO 2,1-9,Let your “Yes“ be “Yes“, “No“, “No“.,Inte
8、rnational Standard 28 Investment in Associates,The International Accounting Standards Board (IASB), defines “significant influence” as the power to participate in the financial and operating policy decisions of the investee, but it is not control or joint control over those policies. If investor has
9、 20% or more ownership, it is presumed to have significant influence, unless it is demonstrated not to be the case. If investor holds less than 20% ownership, it is presumed it does not have significant influence, unless influence can be clearly demonstrated.,1-10,1-10,Let your “Yes“ be “Yes“, “No“,
10、 “No“.,What is “Significant” Influence? (FASB ASC Section 323),Representation on the investees Board of Directors Participation in the investees policy-making process Material intercompany transactions Interchange of managerial personnel Technological dependency Extent of ownership in relation to ot
11、her investor ownership percentages,1-11,0%,20%,50%,100%,Fair Value,Equity Method,Consolidated Financial Statements,General Ownership Guidelines,Significant influence generally assumed (20% to 50% ownership).,Usually lack of control or significant influence.,Financial statements of all related compan
12、ies must be consolidated.,1-12,Let your “Yes“ be “Yes“, “No“, “No“.,Fair Value,Equity Method,Consolidated Financial Statements,General Reporting Guidelines,1: Same as Fair Value 2: Investor recognizes its share (% of owner-ship) of investees net income (net loss) as an increase (decrease) in the inv
13、estment account and dividends as a decrease.,1. Investor records investment at “cost”. 2. Investor recognizes cash dividends from investee as income.,One set of financial statements are prepared to combine accounts of the investor and all of its investees AS A SINGLE ENTITY.,LO 3,1-13,Let your “Yes“
14、 be “Yes“, “No“, “No“.,Fair-Value Method Applied,Step 1: Investor records investment in the investee at “cost”. Journal entry: Debit Investment in Investee Credit Cash (or other Assets/Stock),Cost can be defined as cash paid or the Fair Market Value of other assets given up.,1-14,Fair-Value Method A
15、pplied (continued),Step 2: Investor recognizes dividend income for the amount of cash dividends received from investee Journal entry: Debit Cash Credit Income from Investment,1-15,Fair-Value Method Applied (continued),Step 3: Investor adjusts the investment account to fair-market value (if readily d
16、eterminable at report date) If FMV is higher than current carrying balance in account Journal entry: Debit Investment Credit Unrealized Gain on Investment* * This will appear on the income statement for Trading Securities, or in Other Comprehensive Income for those classified as Available-for-Sale.,
17、Equity Method - Applied,Step 1: Investor records investment in the investee at “cost”. Journal entry:(与FV方法相同) Debit Investment in Investee Credit Cash (or other Assets/Stock),Cost can be defined as cash paid or the Fair Market Value of other assets given up.,1-17,Equity Method Applied (Continued),S
18、tep 2: The investor recognizes its proportionate (pro rata) share of the investees net income (or net loss) for the period. Journal entry:(被投资方net income 增加比例) Debit Investment in Investee Credit Equity in Investee Income,This will appear as a separate line-item on the investors income statement.,1-
19、18,Equity Method Applied (Continued),Step 3: The investor reduces the investment account by the amount of cash dividends received from the investee. Journal entry: Debit Cash Credit Investment in Investee,1-19,Equity Method Example,Little Company reported net income of $200,000 during 2012 and paid
20、cash dividends of $50,000. These figures indicate that Littles net assets have increased by $150,000 during the year. Big owns 20% of Little and records the following entries using the equity method.,Investment in Little Company. . 40,000 Equity in Investee Income . . . . . . . . . 40,000 To accrue
21、earnings of a 20 percent owned investee.,1-20,Cash . . . . . . . . . . . . . . . . . 10,000 Investment in Little Company . . . . 10,000 To record receipt of cash dividend from investee.,Excess of Cost Over Book Value of Acquired Investment,When Cost Book Value of an investment acquired, the differen
22、ce must be identified.,1-21,LO 4,Assets may be undervalued because: Fair values (FV) of some assets and liabilities on investees books are different than book values (BV). Investor is willing to pay extra expecting future benefits to accrue from the investment. Additional amount paid in excess of bo
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