MGAC01H3 Lecture Notes - Equity Method, Ias 39, Financial Statement

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Learning goals: be able to recognize, measure & present non-strategic investments, be able to recognize, measure & present strategic investments. Companies have different motivations for investing in securities issued by other companies. One motivation relates to the returns provided by investments and another motivation relates to strategy. Investments, which are financial instruments, can be either debt or equity. Be able to recognize, measure & present non-strategic investments. Non-strategic investments can be debt or equity instruments. There are three choices of accounting models for non-strategic debt and equity investments (1. cost/amortized cost model, 2. fair value through net income model, 3. fair value through other comprehensive income model: cost/amortized cost model. Measured at cost on acquisition (equal to fair value + transaction costs) At each reporting date, measure at cost or amortized cost. Unrealized holding gains and losses are not applicable as cost is not adjusted. Realized holding gains and losses are reported in net income.

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