Professional Group Limited (PGL) is a private company that is owned by 10 architects The groups goal is to effectively manage the architects investment portfolios Investment already started 10 years ago During that time, each architect invested equal amounts of cash and the group met every other week to determine where the money should be invested Eventually, they decided to incorporate the company and each architect now obtains one tenth of the voting shares The company employs two managers who look after the business full time and make the investment decisions with input from the owners Earnings per year after taxes now average $1 5 million During the year, the following transactions took place Investment A Investment in $100,000, 5 per annum, 10 year bonds of Company A The market rate is currently 8 per annum The owners intend to hold this bond until maturity Investment B Investments in common shares of Company B PGL owns 7 of the total shares of the company and does not have significant influence 3 of the shareholders of PGL would like to hold onto these shares for the long term whereas 2 of the shareholders of PGL would like to hold onto the shares for less than a year and sell them off Investment C Investments in common shares of Company C PGL owns 17 of the total shares PGL has the ability to elect 3 12 members of the Board Although the investments have been mainly in private companies so far, the architects are thinking of revising their investment strategy and investing in more public companies They feel that the stock market is poised for recovery, and are therefore planning to borrow some funds for investment The accountant is currently reviewing the above transactions in preparation for a meeting with the bank The company has never prepared GAAP statements before but is considering doing so The company has not made the decision as to which GAAP to follow (IFRS or ASPE) Instructions Apply the role of the company's accountant and analyze the financial reporting issues Make sure you are addressing considerations under both ASPE and IFRS

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Posted on Jul 22, 2024

Professional Group Limited (PGL) is a private company that is owned by 10 architects. The groups goal is to effectively manage the architects investment portfolios.

Professional Group Limited (PGL) is a private company that is owned by 10 architects. The groups goal is to effectively manage the architects investment portfolios. Investment already started 10 years ago. During that time, each architect invested equal amounts of cash and the group met every other week to determine where the money should be invested. Eventually, they decided to incorporate the company and each architect now obtains one-tenth of the voting shares. The company employs two managers who look after the business full-time and make the investment decisions with input from the owners. Earnings per year after taxes now average $1.5 million. During the year, the following transactions took place:

Investment A Investment in $100,000, 5% per annum, 10-year bonds of Company A. The market rate is currently 8% per annum. The owners intend to hold this bond until maturity.
Investment B Investments in common shares of Company B. PGL owns 7% of the total shares of the company and does not have significant influence. 3 of the shareholders of PGL would like to hold onto these shares for the long term whereas 2 of the shareholders of PGL would like to hold onto the shares for less than a year and sell them off.
Investment C Investments in common shares of Company C. PGL owns 17% of the total shares. PGL has the ability to elect 3/12 members of the Board.

Although the investments have been mainly in private companies so far, the architects are thinking of revising their investment strategy and investing in more public companies. They feel that the stock market is poised for recovery, and are therefore planning to borrow some funds for investment. The accountant is currently reviewing the above transactions in preparation for a meeting with the bank. The company has never prepared GAAP statements before but is considering doing so. The company has not made the decision as to which GAAP to follow (IFRS or ASPE).

Instructions

Apply the role of the company's accountant and analyze the financial reporting issues. Make sure you are addressing considerations under both ASPE and IFRS.