Accounting for Small Investment

Ownership <20% No sign influence

No control
when you
Acquisition: cost or acquisition method
purchased
subsequent to acquisition: fair value when
when you
you still
will hold
reporting: fair value report on the
ending period
Cost method: all of expenditure to have the
investment is recorded as investment
acquisition method: only consideration transferred is
recognized as investment

Purpose of investment is 1. Trading

2. Non-trading

Subsequent to acquisition:
FV: adjusting the carrying amount into the fv based
on the purpose
The difference of the carrying amount and fv Trading
Non trading

Oct 1 your company purchase 100 share of co. ABC

outstanding stocks. It represent 10% ownership. ABC
share has par value of @$10 but was sold @$18.
Your co. also pay broker's fee 2%

Trading
1. At acquisition using acquisition method -->
consideration
2. Subsequenttranferred
to acquisition: using fair value, any
difference---> P/L

Non trading
1. Same with trading except choose to have an option
At acquisition using
2. If apply the option acquisition method
--> all expenditure
acquisition: using
fair value, any
difference---> OCI

Trading or Non-trading not to apply the option

Journal
DR Investment in share 1800
DR Brokers expense 36
CR Cash 1836

Nov 10, 2020 Co ABC paid cash dividend $0.25 per

share
Trading or Non-trading not to apply the option
DR Cash 25
CR Dividend 25
Dec 31 2020 FV of ABC share @$19
DR Investment in share 100
CR Holding Profit 100

Feb 02, 2021 all invetsment are sold $18.5 and paid
broker fee 2%
DR Cash 1813
DR Loss on sale of investment 87
CR Investment in share 1900
 Type 3

During acquisition Trading -->non

Using acquisition method trading is optional
Using cost method

profit or loss
other comprehensive income

expenditure
Shares 1800
Brokers' fee 36
Cash Paid 1836

Non trading and apply the option

Journal
DR Investment in share 1836
CR Cash 1836

Non trading and apply the option Dividen per share 0.25
DR Cash 25 Share owned 100
CR Dividend 25 Dividend Income 25
 FV of Investmet
DR Investment in share 64 Share wned 100
CR OCI 64 FV per share 19
Total FV 1900

DR Cash 1813 Investment in share 1800

DR Loss on sale of investment 87 Difference 100
CR Investmen in share 1900
Carrying amount nn-trading 1836
Difference 64

Selling share 1850

Brokers' fee 37
Cash Received 1813

Carrying amount 1900

Difference -87