Instructions

Adopt the role of the company's accountant and analyze the financial reporting issues.

CA$9\mathrm{.}2$ Finance Cando Communications $($CC$)$ is a public company that owns and operates $10$ broadcast televi:

stations and several specialty cable channels, $10$ newspapers $($including the International Post$),$ and many other non$-$

daily publications. It has a $57\mathrm{.}6\%$ economic interest in Australia TV $($in Australia$)$ and a $29\mathrm{.}9\%$ 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 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 $57\mathrm{.}5\%$ 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 board's $12$

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.

Instructions

Adopt the role of a financial analyst and analyze the financial reporting issues.

CA$9\mathrm{.}3$ Impaired Investments Limited $($IIL$)$ is in the real estate industry. Last year, the company divested itself of some

major investments in real estate and invested the funds in several instruments, as follows:

investments in $5\%$ bonds: currently carried at amortized cost

investments in common shares $($no significant influence or control and not held for trading$)-$Company A: currently

carried at fair value, with gains and losses booked to income

investments in common shares$-$Company B: currently carried at fair value, with gains and losses booked to income

During the current year, similar bonds available in the marketplace are yielding $6\%.$ Although the company is not certain

why this is the case, the controller thinks it may be due to greater perceived risk associated with changes in the economy

and specifically the real estate industry. The investment in Company A shares is significantly below cost at year end,

according to current market prices $($Company A$\text{'}$s shares trade on a stock exchange$).$ The investment in Company B

shares is also below cost, but the controller believes that this is just a temporary decline and not necessarily an

impairment. The controller plans to sell these shares as soon as the decline in price reverses and a $10\%$ return on

investment is achieved. The shares of Company B also trade on a stock exchange.

IIL is currently a private entity but has recently considered going public, perhaps in the next five years, and plans to

adopt IFRS this year.

Instructions

Adopt the role of the controller and discuss the financial reporting issues related to the IIL financial statements.