EMI Inc. is a public company that operates numerous movie theatres in Canada. Historically, it operated as a trust and its business model consisted of distributing all of its earnings to shareholders through dividends. As a result of tax changes two years ago, it converted to a corporation and adopted a strategy of using its excess cash to invest in short term and strategic investments. Some of EMI investment transactions for 2014 are identified below.
In the last quarter of 2013, EMI purchased 40% of the outstanding voting shares of ABC. ABC is a movie distributor and has a contract with EMI whereby it pays management fees to EMI for two of EMI's executives to participate in its strategic committee. Also, as part of the investment, one member from EMI's board of directors is eligible to participate as a member on ABC's board of 12 executive members. Just before year end, EMI signed as a guarantor for ABC's newly issued debt, which it will use to build new movie theatres. EMI agreed to the arrangement provided it could use ABC's existing movie theatres as future collateral. ABC is also a public company and of the remaining 60% of shares, no individual shareholder holds more than I% of outstanding shares. EM! is unsure of how to treat this strategic investment.
At the beginning of the year, EMI invested some of its excess money in corporate bonds with a face value of $1,000,000, for $94,758. The bonds pay a 6% semi-annual interest rate and provide an effective interest rate of 8% over three years. The bonds mature on January 1, 2017. Management has purchased sin1ilar corporate bonds in the past for short-term profits and continues to do so with its existing bonds. However, in the annual board meeting, management had stated its intent of holding these particular corporate bonds as an investment for earning income. EMI has the ability to hold the investment to maturity. EMI is unsure of how to record the investment upon inception and the initial subsequent semi -annual interest payment.
EMI also invested funds into two stock portfolios, A and B. Management's intention for the investment is unclear; however, in the past, similar stock portfolios were purchased with the intention of holding only to generate a short-term gain. Portfolio A consists of a 5% ownership of shares in a publicly traded company, Masrani Corp., for a total investment of $25,000. Portfolio B consists of a 3% ownership in another private movie theatre, for a total investment of $l5,000. Transaction costs for both portfolios were 2% of the purchase price. At year end, the fair value of portfolio A had dropped to $19,222. EMI is unsure of tile method of measurement for each portfolio investment.
As EMI's shares are trading on the capital market, its financial information and filings are tracked by an equity analyst who produces quarterly analyst reports. These reports are used by shareholders and future investors as an independent review of EMI's results. It is now year end and management is preparing for a meeting with its equity analyst to review its accounting policies. The board of directors is expected to approve tile financial statements after the meeting with the analyst.
An excerpt from EMI€™s 2014 financial statements is below.

Instructions
Assume the role of EMI's equity analyst and complete an analysis of EMI's required application of accounting policies for investments. Discuss any choices and differences between IFRS and ASPE. Assume that EMI will not early adopt IFRS 9.

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Consolidated Balance Sheet As of December 31, 2014 Assets Cash and cash equivalents (Note 1) Accounts receivable Inventory Securities $1,890,877 567.321 36,455 Bonds FVTPL, available for sale, and held to maturity (Note 2) Portfolio investments (FVTPL, available for sale) (Note 3) 756,210 899.321 4,150,184 Total Current Assets Fixed Assets Property, plant, and equipment Accumulated depreciation Net fixed assets Long-term investments Deferred tax assets 12.321,888 (3,490,211) 8,831,677 21,999 563,422 Goodwill Total Assets 22,398,959