2019 CFA level 2 finquiz notes FRA
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2019 CFA level 2 finquiz notes FRA
Reading 14Intercorporate Investments1INTRODUCTIONCompanies invest in the debt and equity securities of other companies for various reasons, for exampl 2019 CFA level 2 finquiz notes FRA le, to:•Diversify their asset base.•Enter new markets.•Obtain competitive advantages.•Achieve additional profitability.Example of Debt Securities:•Commercial paper•Corporate and government bonds and notes•Redeemable preferred stock•Asset-backed securitiesExample of Equity Securities:•Common stock•Na 2019 CFA level 2 finquiz notes FRA n-redeemable preferred stockFactors that determine the percentage of equity ownership a company acquires in an investee include:•Resources available•A2019 CFA level 2 finquiz notes FRA
bility to acquire the shares•Desired level of influence or controlBASIC CORPORATE INVESTMENT CATEGORIESInvestments in marketable debt and equity securReading 14Intercorporate Investments1INTRODUCTIONCompanies invest in the debt and equity securities of other companies for various reasons, for exampl 2019 CFA level 2 finquiz notes FRA of the investee (typically less than 20% ownership interest’).2)investments In associates in which the investor can exert significant influence but not control over the investee (typically between 20% -50% ownership interest).3)Joint ventures where control is shared by two or moreentities.4) Busine 2019 CFA level 2 finquiz notes FRA ss combinations i.e. investments in subsidiaries in which the investor has control over the investee. (Greater than 50% ownership interest).• Ownershi2019 CFA level 2 finquiz notes FRA
p percentage is only a guideline: the investment classification depends on the Investor's obiity to influence or control the investee.FinQuiz Notes 2 Reading 14Intercorporate Investments1INTRODUCTIONCompanies invest in the debt and equity securities of other companies for various reasons, for exampl 2019 CFA level 2 finquiz notes FRA Usually < 20%Usually 20% to 50%Usually > 50% or other indications of controlCurrent Financial Reporting (prior to IFRS 9 taking effect)Classified as: •Held to maturity •Available for sale •Fair valve through profit or loss (held for trading or designated as fair value) •Loans and receivablesEquity m 2019 CFA level 2 finquiz notes FRA ethodConsolidationIFRS: Equity method or proportionate consolidationApplicable IFRSIAS 39IAS 28IAS 27IAS 31 (replaced by IFRS 111U.S.GAAPFASB ASC Topi2019 CFA level 2 finquiz notes FRA
c 320FASB ASC Topic 323FASB ASC Topics 805 and 810FASB ASC Topic 323New Financial Reporting (post IFRS 9 takingClassified as: • Fair value through proReading 14Intercorporate Investments1INTRODUCTIONCompanies invest in the debt and equity securities of other companies for various reasons, for examplReading 14Intercorporate Investments1INTRODUCTIONCompanies invest in the debt and equity securities of other companies for various reasons, for examplGọi ngay
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