Cando Communications (CC) is a public company that owns and operates 10 broadcast television stations and several specialty cable channels, 10 newspapers (including the 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 the notes to the annual financial statements, the company owns approximately 15% of the shares and all the convertible and subordinated debentures of Australia TV. The convertible debentures are convertible into shares that would represent 50% of the companys 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 the boards 12 members. Although the company has tried 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 $8 million for the year, down from $50 million the prior year.

Q1. What are the two major issues (name them Issue 1 and Issue 2) that you should address from a financial reporting perspective?

A). What are the alternative accounting policies that are available for Issue 1.

B). Analyze the alternatives available for Issue 1.

C). Which alternative do you recommend for Issue 1?

D). What are the alternative accounting policies available for Issue 2?

E). Analyze the alternatives available for Issue 2.

F). Which alternative do you recommend for Issue 2?