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Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only) 17-1
CHAPTER 17
Investments
ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)
Topics
Questions
Brief
Exercises
Exercises
Problems
Concepts
for Analysis
1. Debt investments.
1, 2, 3, 4, 11,
12
1, 9
4, 7
(a) Held-for-collection;
Held-for-collection and selling
6, 7, 9
1, 2, 4, 7,
11
2, 3, 5, 6, 7
1, 2, 7
1, 4
(b) Trading.
5, 8,
9, 10
3, 5
4
1, 3, 4, 7
1, 4
2. Bond amortization.
7, 8
1, 2, 3, 4
3, 4, 5
1, 2
3. Equity investments.
1, 13, 14, 16
1
4, 7
(a) Non-trading.
17, 23
8, 9
10, 11, 12,
13
5, 6, 8, 9,
10
3
(b) Trading.
10,
15, 17, 23
7
10, 11,
13, 14,
17, 18, 19
3, 5, 6, 8, 9,
10, 11
1, 2, 3
(c) Equity method.
18,
19, 20, 21, 22
10
15, 16, 19,
20
8
5, 6
4. Disclosures of investments.
24
10, 11
5, 8, 9, 10,
11
5. Fair value option.
11, 12, 27
6
7, 8, 19
2, 7
6. Impairments.
25
11, 12
21, 22, 23
1, 3
7. Recycling, Reclassifications
between categories.
26
13
1, 3, 7
*8. Derivatives.
28, 29, 30, 31,
32, 33, 34, 35
24, 25, 26,
27, 28, 29
12, 13, 14,
15, 16, 17
*This material is dealt with in an Appendix to the chapter.
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17-2 Copyright © 2018 Wiley Kieso, IFRS, 2/e, Solutions Manual (For Instructor Use Only)
ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)
Learning Objectives
Exercises
Problems
Concepts
for
Analysis
1. Describe the accounting for debt
investments.
1, 2, 3, 4, 5,
6, 7, 8
1, 2, 3, 4, 7
1, 3, 7
2. Describe the accounting for equity
investments.
10, 11, 12,
13, 14, 15, 17
18, 19,
3, 5, 6, 8,
9, 10, 11
1, 2, 3, 4, 7
3. Explain the equity method of
accounting.
15, 16, 19, 20
8
5, 6
4. Evaluate other major issues related to
debt and equity investments.
9, 21, 22, 23
7
7
*5. Describe the uses of and accounting
for derivatives.
24
12, 13, 14
*6. Explain the accounting for hedges.
25, 26, 27, 28
15, 16, 17
*7. Identify special reporting issues
related to derivative financial
instruments that cause unique
accounting problems.
29
8. Describe required fair value
disclosures.
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Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only) 17-3
ASSIGNMENT CHARACTERISTICS TABLE
Item
Description
Level of
Difficulty
Time
(minutes)
E17.1
Investment classifications.
Simple
510
E17.2
Debt investments.
Simple
1015
E17.3
Debt investments.
Simple
1520
E17.4
Debt investments.
Simple
1015
E17.5
Debt investments.
Simple
1015
E17.6
HFCS debt securities entries and financial statement
presentation
Moderate
10-15
E17.7
Fair value option.
Simple
510
E17.8
Fair value option.
Moderate
1520
E17.9
Comprehensive income disclosure
Moderate
20-25
E17.10
Entries for equity investments.
Simple
1015
E17.11
Equity investments.
Simple
1015
E17.12
Equity investment entries and reporting.
Simple
510
E17.13
Equity investment entries and financial statement
presentation.
Simple
1015
E17.14
Equity investment entries.
Moderate
2025
E17.15
Journal entries for fair value and equity methods.
Moderate
1520
E17.16
Equity method.
Moderate
1015
E17.17
Equity investmentstrading.
Moderate
1015
E17.18
Equity investmentstrading.
Moderate
1520
E17.19
Fair value and equity method compared.
Moderate
1520
E17.20
Equity method.
Simple
1015
E17.21
Impairment.
Moderate
1520
E17.22
Impairment.
Moderate
1015
E17.23
Impairment.
Moderate
20-25
*E17.24
Derivative transaction.
Moderate
1520
*E17.25
Fair value hedge.
Moderate
2025
*E17.26
Cash flow hedge.
Moderate
2025
*E17.27
Fair value hedge.
Moderate
1520
*E17.28
Call option.
Moderate
2025
*E17.29
Cash flow hedge.
Moderate
2530
P17.1
Debt investments.
Moderate
2030
P17.2
Debt investments, fair value option.
Moderate
3040
P17.3
Debt and equity investments.
Moderate
2530
P17.4
Debt investments.
Moderate
2535
P17.5
Equity investment entries and disclosures.
Moderate
2535
P17.6
Equity investments.
Moderate
2535
P17.7
Debt investment entries.
Moderate
2535
P17.8
Fair value and equity method.
Moderate
2030
P17.9
Financial statement presentation of equity investments.
Moderate
2030
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17-4 Copyright © 2018 Wiley Kieso, IFRS, 2/e, Solutions Manual (For Instructor Use Only)
ASSIGNMENT CHARACTERISTICS TABLE (Continued)
Item
Description
Level of
Difficulty
Time
(minutes)
P17.10
Equity investments.
Complex
3040
P17.11
Investmentsstatement presentation.
Moderate
2030
*P17.12
Derivative financial instrument.
Moderate
2025
*P17.13
Derivative financial instrument.
Moderate
2025
*P17.14
Free-standing derivative.
Moderate
2025
*P17.15
Fair value hedge interest rate swap.
Moderate
3040
*P17.16
Cash flow hedge.
Moderate
2535
*P17.17
Fair value hedge.
Moderate
2535
CA17.1
Issues raised about investments.
Moderate
2530
CA17.2
Equity investments.
Moderate
2530
CA17.3
Financial statement effect of investments.
Simple
2030
CA17.4
Equity investments.
Moderate
2025
CA17.5
Investment accounted for under the equity method.
Simple
1525
CA17.6
Equity investments.
Moderate
2535
CA17.7
Fair value.
Moderate
2535
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Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only) 17-5
ANSWERS TO QUESTIONS
1. The two criteria for determining the valuation of financial assets are the (1) company’s business
model for managing their financial assets and (2) contractual cash flow characteristics of the
financial asset.
LO: 1,2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
2. Only debt investments such as loans and bond investments are valued at amortized cost. A
company should use amortized cost if it has a business model whose objective is to hold assets
in order to collect contractual cash flows and the contractual terms of the financial asset gives
specified dates to cash flows.
LO: 1 Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
3. Amortized cost is the initial recognition amount of the investment minus repayments, plus or
minus cumulative amortization and net of any reduction for uncollectibility.
Fair value is the amount for which an asset could be exchanged between knowledgeable willing
parties in an arm’s length transaction.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
4. Companies group investments in debt securities into three separate categories for accounting
and reporting purposes.
Held-for-collection: Investments held (1) with the objective of holding assets in order to
collect contractual cash flows, and (2) the contractual terms of the financial asset give rise
on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Held-for-collection and selling: Investments held (1) with the objective to both collect
contractual cash flows and sell financial assets and (2) the contractual terms of the financial
asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Trading: All debt investments not held-for-collection or held-for-collection and selling. These
investments are bought and held primarily for sale in the near term to generate income on
the short-term price differences.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
5. Lady Gaga should classify this investment as a trading investment because companies frequently
buy and sell this type of investment to generate profits in short term differences in price.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: None, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication