Cando Communications (CC) is a public company that owns and operates 10 broadcast television stations and several specialty cable channels, 10 newspapers (including me International Post), and many other non-daily publications. It has a 57.6% economic interest in Australia TV (in Australia), and a 29.9% interest in Ulster TV (in Northern Ireland).
According to tile notes to the annual financial statements, the company owns approximately 15% of tile shares and all of tile convertible and subordinated debentures of Australia Tv. The convertible debentures are convertible into shares that would represent 50% of the company's total issued shares at the time of conversion. In total, including the debentures, the investment in Australia TV yields a distribution that is equivalent to 57.5% of all distributions paid by Australia Tv. CC has a contractual right to be represented on the board of directors and has appointed three of me board's 12 members.
Although the company has made an attempt to influence the decisions made by Ulster TV management, it has been unsuccessful and does not have any representation on the board of directors.
Investments represent approximately $150 million (about 5% of total assets). Even though revenues were up by 15%, net income was only S8 million for the year end, down from $50 million the prior year. Assume that the company will not early adopt IFRS 9.
Instructions
Adopt the role of a financial analyst and analyze the financial reporting issues.