Inter Corporate Investments

Question 1

Inter Corporate Investment

Answer 1

Marketable Securities -

1. Financial Instruments ==> Upto 20 %
2. Investments in Associates ==> 20 % to 50 %
3. Business Combinations. ==> 50% and above

Question 2

Category Determination

Answer 2

Percentage of Ownership OR

Voting Control

Question 3

Significant Influence Determined How?

Answer 3

1. Board Representation
2. Involvement in Policy Making
3. Material inter company Transactions
4. Interchange of Managerial Personnel
5. Dependence on Technology

Question 4

Business Combination Exception

Answer 4

Govt restrictions Or

Bankruptcy

Question 5

Joint Ventures

Answer 5

IFRS & GAAP ==> Equity Method

Question 6

Accounting Treatement

Answer 6

1. Financial Assets - Debt Only (2 tests) - Amortised Cost
2. Financial Asset - Trading - Fair Value through P & L (FVPL)
3. Financial Asset - Others - Fair Value through OCI (FVOCI)
4. Associates - Equity Method
5. Business Combination - Acquisition Method

Question 7

Amortized Cost

Answer 7

2 Tests

• Business Model Test
• Cash Flow Characteristic Test

Asset ==> Cost + Discount - Premium ==> Balance sheet
Income => Interest (adjusted for Amortized Premium / Discount) ==> P&L

Question 8

FVPL

Answer 8

Debt / Equity ==> Trading Purposes
Debt ==> Non Trading ==> Accounting Mismatch
Derivatives ==> Unless used for hedging
Assets ==> with Embeded Derivatives

Asset ==> Fair Value ==> Balance Sheet
Income ==> Realised & Unrealised Gains + Interest ==> P & L

Question 9

FVOCI

Answer 9

Asset ==> Fair Value ==> Balances Sheet
Income ==> Unrealised Gains / Losses ==> OCI
Income ==> Realised Gains + Interest ==> P & L

Question 10

Reclassification

Answer 10

Equity ==> Not Permissible

Debt ==> Permissible ONLY if Business Model has Changed

Question 11

IFRS 9 Loan Impairment

Answer 11

Changed from Incurred Loss Model to Expected Credit Loss Model

New Criteria recognizes impairment earlier