Question

In: Accounting

Mark T or F in the left margin opposite the question number. When one entity (investor)...

Mark T or F in the left margin opposite the question number.

When one entity (investor) acquires the shares of another entity (investee) and

the investment results in significant influence:

___ 1. The investor may use the equity method to account for the investment if

certain conditions are met and ASPE is followed.

___ 2. Under IFRS, the investment would generally require more extensive

disclosures.

___ 3. The investor may use the cost method to account for the investment if

certain conditions are met and IFRS is followed.

When an investor follows IFRS in accounting for its investments:

___ 4. Transaction costs must be capitalized except when the investment is

accounted for under the fair value through net income model.

___ 5. Gains and losses are always recognized in net income.

___ 6. Investments in subsidiaries must be accounted for under the equity

method.

___ 7. Reclassifications between measurement models are allowed in rare

circumstances.

Expert Solution

1. The statement is True. It is because the investor may use the equity method to account for the investment if certain conditions are met and ASPE is followed.

2. The statement is False. It is because under IFRS, the investment would generally not require more extensive disclosures.

3. The statement is True. It is because the investor may use the cost method to account for the investment if certain conditions are met and IFRS is followed.

4. The statement is True. It is because when an investor follows IFRS in accounting for its investments, transaction costs must be capitalized except when the investment is accounted for under the fair value through net income model.

5. The statement is True. It is because when an investor follows IFRS in accounting for its investments, gains and losses are always recognized in net income.

6. The statement is False. It is because when an investor follows IFRS in accounting for its investments, investments in subsidiaries may not to be accounted for under the equity method.

7. The statement is True. It is because when an investor follows IFRS in accounting for its investments, reclassifications between measurement models are allowed in rare circumstances.

ekkarill92 answered 1 year ago

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