Scribd Logo
Upload

Welcome to Scribd!

  • 60 views

    Analysis of Investments in Associates of An SME1

    Uploaded by

    Jan ryan
    1. Using the cost model, the net loss recognized in 2015 is P11.78 million with total carrying amount of investments of P39.50 million. 2. Using the fair value model, the net profit recognized in 2015 is P5.72 million with total carrying amount of P57 million. 3. Using the equity method, the net loss recognized in 2015 is P8.28 million with total carrying amount of investments of P43 million.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Analysis of Investments in Associates of An SME1

    Uploaded by

    Jan ryan
    60 views3 pages
    1. Using the cost model, the net loss recognized in 2015 is P11.78 million with total carrying amount of investments of P39.50 million. 2. Using the fair value model, the net profit recognized in 2015 is P5.72 million with total carrying amount of P57 million. 3. Using the equity method, the net loss recognized in 2015 is P8.28 million with total carrying amount of investments of P43 million.

    Original Description:

    Audit of Intangible Assets

    Original Title

    Analysis of Investments in Associates of an SME1

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. Using the cost model, the net loss recognized in 2015 is P11.78 million with total carrying amount of investments of P39.50 million. 2. Using the fair value model, the net profit recognized in 2015 is P5.72 million with total carrying amount of P57 million. 3. Using the equity method, the net loss recognized in 2015 is P8.28 million with total carrying amount of investments of P43 million.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    60 views3 pages

    Analysis of Investments in Associates of An SME1

    Uploaded by

    Jan ryan
    1. Using the cost model, the net loss recognized in 2015 is P11.78 million with total carrying amount of investments of P39.50 million. 2. Using the fair value model, the net profit recognized in 2015 is P5.72 million with total carrying amount of P57 million. 3. Using the equity method, the net loss recognized in 2015 is P8.28 million with total carrying amount of investments of P43 million.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Analysis of investments in associates of an SME

    You were engaged by Spurs Corporation, a small and medium-sized entity, to audit its financial
    statements for the year 2015. During the course of your audit , you noted the following regarding
    its recent acquisitions of investments in equity securities:

    a. On January 1, 2015, the entity acquired 25 percent of the equity of each of entities B, C
    and D for P10 million, P15 million and P28 million respectively. Transaction costs of 1
    percent of the purchase price of the shares were incurred by the entity.

    b. On January 2, 2015, entity B declared and paid dividends of P1 million for the year ended
    2014.

    c. On December 31, 2015, entity C declared a dividend of P8 million for the year ended
    2015. The dividend declared by entity C was paid in 2016.

    d. For the year ended December 31, 2015, entities B and C recognized profit of respectively
    P5 million and P18 million. However, entity D recognized a loss of P20 million for the
    year.

    e. Published price quotations do not exist for the shares of entities B, C and D. Using
    appropriate valuation techniques the entity determined the fair value of its investments in
    entities B, C and D at December 31, 2015 as P13 million, P29 million and P15 million
    respectively. Costs to sell are estimated at 5 percent of the fair value investments.

    f. The entity has no subsidiaries and therefore does not produce consolidated financial
    statements.

    In accordance with section 14.4 of the PFRS for SMEs, an investor shall account for all of its
    investments in associates using one of the following: (a) the cost model in paragraph 14.5, (b) the
    equity method in paragraph 14.8, or (c) the fair value model in paragraph 14.9. The entity is
    seeking your advice on the effect of each method on the carrying amount of the investment and
    its effect on profit or loss.

    REQUIRED:

    Determine the net amount to be recognized in 2015 profit or loss and the total carrying amount
    of the investments as of December 31, 2015 using:

    1. Cost Model
    2. Fair Value Model
    3. Equity Method

    SOLUTION:
    1. P/L:P(11.78) million; CA:P39.50 million
    SFP amount (Cost Model) B C D Total
    Purchase price 10,000,000 15,000,000 28,000,000 53,000,000
    Transaction costs 100,000 150,000 280,000 530,000
    Total cost 10,100,000 15,150,000 28,280,000 53,530,000
    Impairment loss* - - (14,030,000) (14,030,000)
    CA, 12/31/12 10,100,000 15,150,000 14,250,000 39,500,000
    *Impairment loss computation:
    Total cost 10,100,000 15,150,000 28,280,000
    FV less cost to sell (RA) 12,350,000 27,550,000 14,250,000
    - - 14,030,000

    P/L amount (Cost Model) B C D Total


    Dividend income 250,000 2,000,000 - 2,250,000
    Impairment loss - - (14,030,000) (14,030,000)
    250,000 2,000,000 (14,030,000) (11,780,000)

    2. P/L:P5.72 million; CA:P57 million

    FP amount (Fair Value Model) B C D Total


    Fair value 13,000,000 29,000,000 15,000,000 57,000,000

    P/L amount (Fair Value Model) B C D Total


    Transaction costs (100,000) (150,000) (280,000) (530,000)
    Dividend income 250,000 2,000,000 - 2,250,000
    FV adjustment gain (loss)* 3,000,000 14,000,000 (13,000,000) 4,000,000
    3,150,000 15,850,000 (13,280,000) 5,720,000

    *FV adjustment gain (loss)


    Fair value 13,000,000 29,000,000 15,000,000
    CA before FV adjustment 10,000,000 15,000,000 28,000,000
    3,000,000 14,000,000 (13,000,000)

    3. P/L:P(8.28) million ; CA:P43.00 million


    SFP amount (Equity Method) B C D Total
    Purchase price 10,000,000 15,000,000 28,000,000 53,000,000
    Transaction costs 100,000 150,000 280,000 530,000
    SOPA (SOLA) 1,250,000 4,500,000 (5,000,000) 750,000

    Dividends (250,000) (2,000,000) - (2,250,000)


    CA, 12/31/12 - before impairment 11,100,000 17,650,000 23,280,000 52,030,000
    Impairment loss* - - (9,030,000) (9,030,000)
    CA, 12/31/12 11,100,000 17,650,000 14,250,000 43,000,000

    *Impairment loss computation:


    CA, 12/31/12 - before impairment 11,100,000 17,650,000 23,280,000
    FV less cost to sell (RA) 12,350,000 27,550,000 14,250,000
    - - 9,030,000

    P/L amount (Equity Method) B C D Total


    SOPA (SOLA) 1,250,000 4,500,000 (5,000,000) 750,000
    Impairment loss - - (9,030,000) (9,030,000)
    1,250,000 4,500,000 (14,030,000) (8,280,000)

    You might also like