SCHWESERNOTES - BOOK 2
Reading 7: Key Concepts
Eisai
LOS 7.a
Accounting for investments:
Ownership Degree of Influence Accounting Treatment
Less than 20%
No significant influence Amortized cost, fair value through profit or loss, fair value through OCI
(investments in financial assets)
20%–50%
Significant influence Equity method
EE.biztia
(investments in associates)
jointventurestoo
More than 50%
Control Acquisition method
(business combinations)
Investments in financial assets: Dividends and interest income are recognized in the investor's income statement. Amortized cost
securities are reported on the balance sheet at amortized cost. Subsequent changes in fairstatement come so
value are ignored. Fair value through profit or
Iiiiii
loss securities are reported at fair value, and the unrealized gains and losses are recognized in the income statement. Fair value through
OCI securities are also reported at fair value, but the unrealized gains and losses are reported in stockholders' equity.
Investmentsa
Financial insset
associates/joint ventures: With the equity method, the proportionate share of the investee's earnings increase the
investor's investment account on the balance sheet and are recognized in the investor's income statement. Dividends received reduce
the investment account. Dividends received are not recognized in the investor's income statement under the equity method. In rare
cases, proportionate consolidation may be allowed. Proportionate consolidation is similar to a business combination, except the investor
ipmtttmli.dise.TT
includes only the proportionate share of the assets, liabilities, revenues, and expenses of the joint venture. No minority owners' interest
is required.
fetaig
Business combinations: In an acquisition, all of the assets, liabilities, revenues, and expenses of the subsidiary are combined with the
aeoFE.yitie debceeatin.FI
parent. Intercompany transactions are excluded. When the parent owns less than 100% of the subsidiary, it is necessary to create a
parent. e
noncontrolling interest account for the proportionate share of the subsidiary's net assets and net income that is not owned by the
devofortrating
Under IFRS, the sponsor of a special purpose entity (SPE) must consolidate the SPE if their economic relationship indicates that the
sponsor controls the SPE. U.S. GAAP requires that a variable interest entity (VIE) must be consolidated by its primary beneficiary.
Associates
LOS 7.b METHOD
EQUITY
IFR GAAP
ONELINE
Di!erences between IFRS and U.S. GAAP treatment of intercorporate investments include:
1
Testedas NCA Fu
IFRS and U.S. GAAP di!er between contingent asset and liability recognition under the acquisition method.
ufmmutyy
allequity
method
IFRS permits either the partial goodwill or full goodwill method to value goodwill and noncontrolling interest in business
2 PILofinvested by
combinations. U.S. GAAP requires the full goodwill method.
excessoverBV
LOS 7.c
dividends
Eatgoviftoidgtaw.tl
3
That
The e!ects of the equity method versus the acquisition method: impairment allowed reversal
reversal allowed
Both report the same net income.
4 ANCA 1S
Acquisition method equity will be higher by the amount of minorityinvestec
interest. upstream
Assets and liabilities are higher under the acquisition method.
Sales are higher under the acquisition method. downstream saltmithehill
Eaetiysitangidends earningshigherthanfinancialassetsmethod
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Page 1 of 2
debt revenueignored
Equitiescan'tbereclassified debtcan take FV transferdate
, SCHWESERNOTES - BOOK 2
Reading 7: Key Concepts
LOS 7.a
Businesscombis ACQUISITIONMETHOD
Accounting for investments:
Ownership 1 Combine ALLassets liabilities Accounting
Degree of Influence revenue Treatment
expenses
2 Assets
byequitystake
Less than 20%
No significant influence Amortized cost, fair value through profit or loss, fair value through OCI
(investments in financial assets)
3
20%–50%
nuttis.ly klE iratedinB.s i.s 19notownedl
(investments in associates) byΔP
Significant influence
Landdiv Equity method
IFRI GAAP
More than 50%
Control Acquisition method
excessover BV
(business combinations) allocatedtoFvofident.A.GL
Initial FULL
88ginterim
Investments in financial assets: Dividends and interest income are recognized in the investor's income statement. Amortized cost
securities are reported on the balance sheet at amortized cost. Subsequent changes in fair value are ignored. Fair value through profit or
Fettian is t PElfneftaE.Yssdet
loss securities are reported at fair value, and the unrealized gains and losses are recognized in the income statement. Fair value through
OCI securities are also reported at fair value, but the unrealized gains and losses are reported in stockholders' equity.
Investments in associates/joint ventures: With the equity method, the proportionate share of the investee's earnings increase the
minorityinterest PARTIAL FULL
investor's investment account on the balance sheet and are recognized in the investor's income statement. Dividends received reduce
the investment account. Dividends received are not recognized in the investor's income statement under the equity method. In rare
gEthf
Fuotnetdit.assets.ph
cases, proportionate consolidation may be allowed. Proportionate consolidation is similar to a business combination, except the investor
gity
includes only the proportionate share of the assets, liabilities, revenues, and expenses of the joint venture. No minority owners' interest
is required.
Fingerhut NBU row amount
Business combinations: In an acquisition, all of the assets, liabilities, it pertinent
revenues, and expenses of the subsidiary are combined with the
parent. Intercompany transactions are excluded. When the parent owns less than 100% of the subsidiary, it is necessary to create a
noncontrolling interest account for the proportionate share of the subsidiary's net assets and net income that is not owned by the
parent.
EEEL
Under IFRS, the sponsor of a special purpose entity (SPE) must consolidate the SPE if their economic relationship indicates that the
bargainpurchase Ast Fuofnet
assets
sponsor controls the SPE. U.S. GAAP requires that a variable interest entity (VIE) in i S
must be consolidated by its primary beneficiary.
purchase
LOS 7.b
Di!erences between IFRS and U.S. GAAP treatment of intercorporate investments include:
Jointventures EQUITYMETHOD insomecases PROP CONSOLIDATIONallowed
IFRS and U.S. GAAP di!er between contingent asset and liability recognition under the acquisition method.
IACQ
METHOD butby owned
IFRS permits either the partial goodwill or full goodwill method to value goodwill and noncontrolling interest in business
combinations. U.S. GAAP requires the full goodwill method.
LOS 7.c
EQUITY
The e!ects of the equity METHOD
method versus the acquisition method: ACQUISITIONMETHOD
Both report the same net income.
of netassets
Acquisition method equity will be higher by the amount of minority interest. allassets liabs
Assets and liabilities are higher under the acquisition method.
of netincome
Sales are higher under the acquisition method.
all rev exp
netofdividends netofdividends
series is
mnaaiitif.i.gs
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Page 1 of 2
y
Reading 7: Key Concepts
Eisai
LOS 7.a
Accounting for investments:
Ownership Degree of Influence Accounting Treatment
Less than 20%
No significant influence Amortized cost, fair value through profit or loss, fair value through OCI
(investments in financial assets)
20%–50%
Significant influence Equity method
EE.biztia
(investments in associates)
jointventurestoo
More than 50%
Control Acquisition method
(business combinations)
Investments in financial assets: Dividends and interest income are recognized in the investor's income statement. Amortized cost
securities are reported on the balance sheet at amortized cost. Subsequent changes in fairstatement come so
value are ignored. Fair value through profit or
Iiiiii
loss securities are reported at fair value, and the unrealized gains and losses are recognized in the income statement. Fair value through
OCI securities are also reported at fair value, but the unrealized gains and losses are reported in stockholders' equity.
Investmentsa
Financial insset
associates/joint ventures: With the equity method, the proportionate share of the investee's earnings increase the
investor's investment account on the balance sheet and are recognized in the investor's income statement. Dividends received reduce
the investment account. Dividends received are not recognized in the investor's income statement under the equity method. In rare
cases, proportionate consolidation may be allowed. Proportionate consolidation is similar to a business combination, except the investor
ipmtttmli.dise.TT
includes only the proportionate share of the assets, liabilities, revenues, and expenses of the joint venture. No minority owners' interest
is required.
fetaig
Business combinations: In an acquisition, all of the assets, liabilities, revenues, and expenses of the subsidiary are combined with the
aeoFE.yitie debceeatin.FI
parent. Intercompany transactions are excluded. When the parent owns less than 100% of the subsidiary, it is necessary to create a
parent. e
noncontrolling interest account for the proportionate share of the subsidiary's net assets and net income that is not owned by the
devofortrating
Under IFRS, the sponsor of a special purpose entity (SPE) must consolidate the SPE if their economic relationship indicates that the
sponsor controls the SPE. U.S. GAAP requires that a variable interest entity (VIE) must be consolidated by its primary beneficiary.
Associates
LOS 7.b METHOD
EQUITY
IFR GAAP
ONELINE
Di!erences between IFRS and U.S. GAAP treatment of intercorporate investments include:
1
Testedas NCA Fu
IFRS and U.S. GAAP di!er between contingent asset and liability recognition under the acquisition method.
ufmmutyy
allequity
method
IFRS permits either the partial goodwill or full goodwill method to value goodwill and noncontrolling interest in business
2 PILofinvested by
combinations. U.S. GAAP requires the full goodwill method.
excessoverBV
LOS 7.c
dividends
Eatgoviftoidgtaw.tl
3
That
The e!ects of the equity method versus the acquisition method: impairment allowed reversal
reversal allowed
Both report the same net income.
4 ANCA 1S
Acquisition method equity will be higher by the amount of minorityinvestec
interest. upstream
Assets and liabilities are higher under the acquisition method.
Sales are higher under the acquisition method. downstream saltmithehill
Eaetiysitangidends earningshigherthanfinancialassetsmethod
https://www.kaplanlearn.com/education/dashboard/index/603a30d5be4d18486a42cd599e7973d1/course/108321457/node/5352489 24/02/2025, 16:01
Page 1 of 2
debt revenueignored
Equitiescan'tbereclassified debtcan take FV transferdate
, SCHWESERNOTES - BOOK 2
Reading 7: Key Concepts
LOS 7.a
Businesscombis ACQUISITIONMETHOD
Accounting for investments:
Ownership 1 Combine ALLassets liabilities Accounting
Degree of Influence revenue Treatment
expenses
2 Assets
byequitystake
Less than 20%
No significant influence Amortized cost, fair value through profit or loss, fair value through OCI
(investments in financial assets)
3
20%–50%
nuttis.ly klE iratedinB.s i.s 19notownedl
(investments in associates) byΔP
Significant influence
Landdiv Equity method
IFRI GAAP
More than 50%
Control Acquisition method
excessover BV
(business combinations) allocatedtoFvofident.A.GL
Initial FULL
88ginterim
Investments in financial assets: Dividends and interest income are recognized in the investor's income statement. Amortized cost
securities are reported on the balance sheet at amortized cost. Subsequent changes in fair value are ignored. Fair value through profit or
Fettian is t PElfneftaE.Yssdet
loss securities are reported at fair value, and the unrealized gains and losses are recognized in the income statement. Fair value through
OCI securities are also reported at fair value, but the unrealized gains and losses are reported in stockholders' equity.
Investments in associates/joint ventures: With the equity method, the proportionate share of the investee's earnings increase the
minorityinterest PARTIAL FULL
investor's investment account on the balance sheet and are recognized in the investor's income statement. Dividends received reduce
the investment account. Dividends received are not recognized in the investor's income statement under the equity method. In rare
gEthf
Fuotnetdit.assets.ph
cases, proportionate consolidation may be allowed. Proportionate consolidation is similar to a business combination, except the investor
gity
includes only the proportionate share of the assets, liabilities, revenues, and expenses of the joint venture. No minority owners' interest
is required.
Fingerhut NBU row amount
Business combinations: In an acquisition, all of the assets, liabilities, it pertinent
revenues, and expenses of the subsidiary are combined with the
parent. Intercompany transactions are excluded. When the parent owns less than 100% of the subsidiary, it is necessary to create a
noncontrolling interest account for the proportionate share of the subsidiary's net assets and net income that is not owned by the
parent.
EEEL
Under IFRS, the sponsor of a special purpose entity (SPE) must consolidate the SPE if their economic relationship indicates that the
bargainpurchase Ast Fuofnet
assets
sponsor controls the SPE. U.S. GAAP requires that a variable interest entity (VIE) in i S
must be consolidated by its primary beneficiary.
purchase
LOS 7.b
Di!erences between IFRS and U.S. GAAP treatment of intercorporate investments include:
Jointventures EQUITYMETHOD insomecases PROP CONSOLIDATIONallowed
IFRS and U.S. GAAP di!er between contingent asset and liability recognition under the acquisition method.
IACQ
METHOD butby owned
IFRS permits either the partial goodwill or full goodwill method to value goodwill and noncontrolling interest in business
combinations. U.S. GAAP requires the full goodwill method.
LOS 7.c
EQUITY
The e!ects of the equity METHOD
method versus the acquisition method: ACQUISITIONMETHOD
Both report the same net income.
of netassets
Acquisition method equity will be higher by the amount of minority interest. allassets liabs
Assets and liabilities are higher under the acquisition method.
of netincome
Sales are higher under the acquisition method.
all rev exp
netofdividends netofdividends
series is
mnaaiitif.i.gs
https://www.kaplanlearn.com/education/dashboard/index/603a30d5be4d18486a42cd599e7973d1/course/108321457/node/5352489 24/02/2025, 16:01
Page 1 of 2
y
