The Rider Corporation operates throughout Canada buying and selling widgets. In hopes of expanding into more profitable markets, the company recently decided to open a small subsidiary in California. On October 1, Year 2, Rider invested CDN$928,000 in Riderville USA Ltd. Its investment was immediately converted into US$940,000. One-half of this money was used to purchase land to be held for the possible construction of a plant, and one-half was invested in held-for-trading equity securities. Nothing further happened at Riderville throughout the remainder of Year 2. However, the U.S. dollar weakened relative to the Canadian dollar and the exchange rate at December 31, Year 2, was US$1 = CDN$0.95. Fortunately, the value of the land purchased by Riderville increased to US$500,000 and the securities were worth US$490,000 at the end of the year.
The accountant for Rider realized that the investments of the U.S. subsidiary had increased in value but did not plan to report this unrealized gain in the consolidated financial statements. However, the CEO wants to report the true economic value of these investments.
Required:
(a) What is the true economic value of the assets owned by Riderville USA at the end of Year 2?
(b) Can Rider report the economic value of these assets in the consolidated balance sheet under IFRSs? If not, how should Rider report each of these assets on its consolidated balance sheet and how should the related gains be reported? Assume that the securities are classified as fair value through profit or loss.