中央财经大学会专业英语教程Chapter 3.pptVIP

Acquired goodwill Acquired goodwill arises when a company is acquired. Goodwill is recorded only when a transaction occurs. Recording goodwill Example: p80 Impairment of goodwill For fiscal years beginning after December 31,2006, a company must review its goodwill for impairment at least annually at the reporting level. A company reviews the purchased goodwill for impairment using a two-step approach. If the fair value of the reporting unit is greater than the book value, goodwill is not considered to be impaired, and the second step is not necessary. Entry Example: p82 3.3 Investments Corporations purchase investments in debt or stock securities generally for one of three reasons. Accounting for debit investment Debit investments are investments in government and corporation bonds. In accounting for debit investment, entries are required to record 1. the acquisition 2. the interest revenue 3. the sale Entry Example: p82 Accounting for stock investments Stock investments are investments in the capital stock of corporations. The accounting for investments in common stock is based on the extent of the investor’s influence over the operation and financial affairs of the issuing corporation. Holding less than 20% Recording acquisition of stock investments Recording dividends Recording sale of stock Accounting for stock investments Holding between 20%and 50% If investor owns between 20% and 50% of the common stock of a corporation, it is presumed that the investor has significant influence over the financial and operating activities of the investee. Companies with stock holding between 20% and 50% in an investee use an approach called the equity method. Example: p 86 Holding of more than 50% parent company and subsidiary(affiliated) company When a company owns more than 50% of the common stock of another company, consolidated financial statements are usually prepared. Valuing and reporting investments Categories of securities 1. Trading securitie