CA 9-2

Role: Financial Analyst

Company Overview:

Cando Communications (CC) is a public television, media, and publications company

57.6% economic interest in AustraliaTV, 29.9% interest in Ulster TV
Contractual rights to be represented on board of directors for AustraliaTV (3 out of 12), but no
influence for UlsterTV

Constraints

IFRS 9
Revenues up by 15%, net income down $42 million
Investments 5% of total assets

Users

Auditors
CC
AustraliaTV & Ulster TV

Issue #1: Significant Influence

Under IFRS , must have ability to influence big decisions within a corporation, usually
determined by percentage of voting shares
AustraliaTV CC has 50% of companys total issues shares at time of conversion and 3 out of 12
members on the board of directors (25%)
UlsterTV made attempts to influence decisions to no avail and does not have any
representation on board of directors

Conclusion

CC has significant influence in AustraliaTV, but none in UlsterTV, and therefore does not have
power to exert significant influence in this company
Under AustraliaTV, significant influence investments will be accounted for using the equity
method

Issue #2: Investments

A significant portion of assets is attributed to investments

In IAS 39 only components of financial items can be hedged
In IFRS 9 both non-financial and financial items can be hedged (no distinction) in order to
closely align with risk management

Conclusion

Risks will be better outlined under IFRS 9. CC will have better understanding of risks associated
with investments to prevent large decreases in net income.