Chapter 9
Investments
467
AP-11B (
1
4
)
Different accounting methods of recording investments impact different accounts in either
the balance sheet or income statement.
Required
a) Indicate which accounting method should be used under IFRS for recording each
transaction listed in the table below. The first transaction has been completed as an
example.
Item
No.
Scenario
Valuation Method
1 Accrued interest of $150 for a 120-day T-bill that the investor intends to hold until
maturity for interest revenue.
Amortized Cost
2 Sale of a long-term investment bond for $10,300 cash before maturity. The bond
had a book value of $10,000. The purpose of this investment was for earning
interest revenue.
3 Received interest payment of $4,000 for a long-term bond investment. The interest
revenue earned was $4,300.
4 A non-strategic short-term bond investment accrued interest revenue of $200 at
year-end. The purpose of this investment was for trading.
5 The fair value of a non-strategic short-term bond decreased by $600. The purpose
of this investment was for trading.
6 The fair value of a long-term bond investment increased by $3,600. This bond is
invested with the purpose of earning interest.
7 An associate company reported $10,000 of net loss. The investor owns 25% of an
associate’s common shares with significant influence.
8 A fair value of a long-term equity investment decreased by $2,000. The investor
has insignificant influence.
b) Complete the table to show how each transaction from the table above impacts each
account for the investor. Assume the investor follows IFRS. The first row has been
completed as an example.
Income Statement
Balance Sheet
Revenue
Expense
OCI
Current Assets
Non-Current
Assets
Item
No.
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
1
150
150
2
3
4
5
6
7
8
