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Acquisition of Measurement
Investment hierarchy Equity swap
FV of asset given FV of shares issued
FV of asset Equity swap is a mode of settling
received FV or liability settled obligation through issuance of
shares, the hierarchy would be
different for transactions
involving issuance of shares still
Carrying amount but this time, for acquisition of
of asset given Carrying amount of liability settled an asset
The rule will be different if the
investment is classified as an
investment In associate or Cash dividend
subsidiary, in such case, dividends Recognized as
received are not recognized as an dividend income, will
income but are considered as not affect the balance
return OF investment and thus of the investment
decrease the investment balance account Charged against Retained earnings
the date in which the
dividend income will Date of
be recognized declaration the date in which RE is reduced
Cash proceeds/sales
price will include the
dividend income or
dividend receivable,
this is relevant Sale of shares
because this affects after dividends
the computation of are declared but
the gain or loss from before the date
the sale of record does not concern the corporation
Also recognized as
income (also at the RE, together with the related
date of declaration) payable, is regularly adjusted
and is measured as Property Still charged against RE (amount of upward and downward for
fair value dividend deduction to RE is the asset's FV), changes in the assets FV
unlike cash dividends,
liquidating dividends
reduce the balance of
the investment
account because they
represent return OF Liquidating liquidating dividends are taken out of
investment dividend capital, so this is not charged to RE
the charge to RE is the FV of shares if the
declaration is a small stock dividend, at fair
Share divided of same par value if declaration is a large stock
class Share dividends dividend
the only result would be on the
cost per share held, same amount
of cost representing more shares,
the change in cost per share is
relevant in computing for gain or not recognized
loss when the shares are sold but as income, will
not all; the change in the number also not affect
of shares will become relevant the balance of
when cash dividends or other type the investment
of dividends are declared account no accounting issue
Share dividend of
different class
the old
investment
balance would no acounting issue, just recognize the
still does not result in an income, now be split issuance of the shares
total investments (and by between two
extension, total assets) will not be investments,
affected. Instead of one basis of splitting
investment, there will then be two is the total fair
investments but the combined value of each
total will be the same as when class (weighted
there was still one investment average)
note the difference: if stock
dividends were declared then no
income, but if it is a cash dividend will result in dividend
that was declared notwithstanding income equal to the Shares received
it was ultimately paid in shares, fair value of the in lieu of cash derecognze the cash dividend payable,
there will still be dividend income shares received dividends recognize the issuance of shares
Use as if approach,
assume that the
shares were received
Under the assumption, no dividend but were just
income because this involves share immediately sold and derecognize the stock dividends payble
dividends, only gain or loss on the the selling price being Cash received in account and the related share premium;
investment arising from the the actual cash lieu of share credit cash for the amount paid, any
presumed sale received dividends discrepancy is charged to RE
Does not affect total
investment, only
changes the cost per
Requires a memorandum entry share and the par Split up/split
only value per share down