It is July 31, 2013, and you have just started working for Andrelli Corp. as part of the controller's group involved in current financial reporting problems. Kameela Franklin, controller for Andrelli, is interested in your accounting background because the company has several different types of investments and is wondering how to report them. The company is currently a private entity but is thinking of adopting IFRS. The following are the investments for which the controller is trying to determine what the appropriate accounting treatment would be under ASPE or the IFRS 9 standard, which the company would adopt early.
Situation 1
The company invests excess cash in term deposits that mature in six months and bear interest at 1%. The company holds on to these investments until maturity to receive the cash flows at the maturity date.
Situation 2
Andrelli has an investment in shares of Warren Corp. in which it owns I 0% of the voting shares. Warren Corp. is a private company and therefore the shares are not publicly traded.
Situation 3
A corporate bond investment will come due in 2019 and pays interest at a fixed rate of 8%. The company's intention is to hold this until maturity and use the cash flows from the interest payments to help fund operations.
Situation 4
The company invests in money market funds, again using excess cash. The company cashes in these investments as cash is required.
Situation 5
The company has purchased 20% of the common shares of a supplier and has been able to get three of its nominees elected to the supplier's 10-person board of directors. The supplier reported record earnings of $100,000 this year, but unfortunately was not able to pay out a dividend.
Instructions
(a) Under ASPE, what is the effect on the balance sheet and earnings of each of the independent situations above?
(b) Under IFRS 9, what is the effect on the statement of financial position and earnings of each of the independent situations above?