Portions of this public transaction have been simplified and modified for academic purposes Bombardier and CDPQ...

 

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Portions of this public transaction have been simplified and modified for academic purposes Bombardier and CDPQ enter into definitive agreement: CDPQ to acquire 30% of newly-created BT Holdco for $1.5 billion On February 11, 2016, Bombardier closed the sale to the CDPQ of a $1.5-billion convertible Class-B share investment in Bombardier Transportation's newly-created holding company, Bombardier Transportation (Investment) UK Limited (BT Holdco). Under the terms of the investment, the CDPQ is entitled to its pro-rata portion (on an as- converted basis, initially equal to 30% of BT Holdco Class A common shares) of any dividends declared. Dividends are payable in cash or, subject to certain conditions, in additional convertible shares at the option of BT Holdco (any such issuance to increase the CDPQ's participation, consequently the conversion feature percentage is not fixed). The auditors have analyzed the transaction and have determined that a comparable non-convertible financial security is valued at $1.2 billion. Assume BT Holdco converted its CDPQ's shares into 32.5% of BT Holdco's Class A common shares on February 16th, 2020. Assume that the fair value of BTs assets and liabilities are equal to $39 billion and $32 billion respectively. 1) Using the case facts above and applying IFRS discuss the measurement and classification of the transaction 2) Write any journal entries for Bombardier Transport's that you deem necessary Portions of this public transaction have been simplified and modified for academic purposes Bombardier and CDPQ enter into definitive agreement: CDPQ to acquire 30% of newly-created BT Holdco for $1.5 billion On February 11, 2016, Bombardier closed the sale to the CDPQ of a $1.5-billion convertible Class-B share investment in Bombardier Transportation's newly-created holding company, Bombardier Transportation (Investment) UK Limited (BT Holdco). Under the terms of the investment, the CDPQ is entitled to its pro-rata portion (on an as- converted basis, initially equal to 30% of BT Holdco Class A common shares) of any dividends declared. Dividends are payable in cash or, subject to certain conditions, in additional convertible shares at the option of BT Holdco (any such issuance to increase the CDPQ's participation, consequently the conversion feature percentage is not fixed). The auditors have analyzed the transaction and have determined that a comparable non-convertible financial security is valued at $1.2 billion. Assume BT Holdco converted its CDPQ's shares into 32.5% of BT Holdco's Class A common shares on February 16th, 2020. Assume that the fair value of BTs assets and liabilities are equal to $39 billion and $32 billion respectively. 1) Using the case facts above and applying IFRS discuss the measurement and classification of the transaction 2) Write any journal entries for Bombardier Transport's that you deem necessary

Answer rating: 100% (QA)

1 The investment by CDPQ should be measured at fair value and classified as an equity investment The ... View the full answer