FSA - CHAPTER 23 - END OF CHAPTER QUESTION 12 investment, background, accounting, 2011

PieMan

Hello.

Does this seem right?
Question - Based on Gelblum's estimates, Zimt's net income in 2011 will most likely be:
a highest if zimt is deemed to have control of oxbow
b highest if zimt is deemed to have significant influence over oxbow
c independent of accounting method used for the investment in oxbow.

background: ifrs is used

my answer is a because that means the company is consolidated into the balance sheet. I said no to answer b because then partial consolidation is used. Answer c didn't make sense because of the fact that entires are different based on different methods. The book says c is correct.


Any help?

kingstongal

but this is not a B/S question, it's NI.

Kapie

NI is the same under all investment accounting methods bro

jarobi04

You're not thinking about the additional depreciation expense and other expenses that result from owning 100% of the company versus 50%.

Sportsman

Yes you are correct. Income statement entry for minority interest brings it down. Gonna be the same. Oooookkkkk never mind.

kkn006

Remember also that there is no MI if the subsidiary is 100% owned. MI only occurs if less than 100% of the company is owned.