3.04- Investments under IFRS Flashcards
What are the two GENERAL APPROACHES applied to investments in financial instruments under IFRS?
- Amortized cost
- Fair value through profit or loss method
How are the differences between original cost and the face amount treated under the AMORTIZED COST APPROACH in IFRS?
A discount or a premium
Under what conditions are AMORTIZED COSTS applied under IFRS?
- Payments consist exclusively of principal and interest
- Instruments are held to collect contractual cash flows
Would AMORTIZED COSTS be appropriate for “investments in equity securities”?
No!
If an investment is not reported at AMORTIZED COSTS, what is it reported at?
FAIR VALUE
In order to be classified as FAIR VALUE THROUGH PROFIT OR LOSS, what must an equity security have?
ACTIVE MARKET
Under IFRS, what is the name of the investee when an investor has significant influence over them?
Associate
How are investments in an ASSOCIATE accounted for?
EQUITY METHOD
If an investor has full control, what type of financial statements are appropriate?
CONSOLIDATED FINANCIAL STATEMENTS
What is it called when an investor shares control in a joint arrangement?
JOINT OPERATION or JOINT VENTURE
When is a joint arrangement considered a JOINT VENTURE?
When those who share control also have rights to the net assets of the arrangement
How are JOINT VENTURES accounted for?
EQUITY METHOD
When is a joint arrangement considered a JOINT OPERATION?
When those with joint control do not have rights to net assets
How are JOINT OPERATIONS accounted for?
PROPORTIONATE CONSOLIDATION APPROACH
What two things happen under the PROPORTIONATE CONSOLIDATION APPROACH?
- Investor recognizes a proportionate amount of assets, liabilities, revenues, and expenses in its financial statements
- These recognitions must be in accordance with IFRS guidelines
