At the beginning of 2018, Bering Limited purchased three investments:
1. Government of Alberta bonds, which are to be held to maturity.
2. Common shares in Atlas Inc., representing only 1% of the shares of this company, that are expected to be traded soon.
3. 40% of the common shares in CH Resources Ltd.
The cost and the fair value at December 31, 2018, for each of these investments are shown below:
Security Cost Fair Value
Government of Alberta bonds................................$100,000..............$ 90,000
Atlas Inc. common shares.........................................100,000...............105,000
CH Resources Ltd. common shares..........................100,000..............111,000
During 2018, interest revenue of $3,000 was earned and received on the Government of Alberta bonds. CH Resources reported net income in 2018 of $10,000, and declared and paid dividends of $2,000. No dividends were received on the Atlas shares.
Instructions
(a) The board of directors of Bering Limited is considering the use of IFRS and is aware that there are choices that can be made when accounting for investments using these standards. The board would like you to choose the appropriate model for each type of investment that will maximize Bering's financial position and profitability and determine the amounts that would appear on the December 31, 2018, financial statements given these choices.
(b) Assuming that the company may prefer to use ASPE rather than IFRS, address the issues raised in part CT12.4(a) above but do this in an ASPE context.