會計學(xué)原理英文教學(xué)課件：Chapter-15 INVESTMENTS AND INTERNATIONAL OPERATIONS

1、INVESTMENTS ANDINTERNATIONAL OPERATIONSChapter 15BASICS OF INVESTMENTSCompanies transfer excess cash into investments to produce higher income.Some companies are set up to produce income from investments.Companies make investments for strategic reasons.Motivation for InvestmentsC1INVESTMENTS OF SELE

2、CTED COMPANIESSHORT-TERM VERSUS LONG-TERM INVESTMENTSShort-term investments:are securities that management intends to convert to cash with one year or the operating cycle, whichever is longer. are readily convertible to cash.Long-term investments:are not readily convertible to cash. are not intended

3、 to be converted to cash in the short term.are reported in the noncurrent section of the balance sheet, often in its own category.C1CLASSIFICATION AND REPORTINGHeld-To-MaturityAvailable-For-SaleSignificant InfluenceControlling InfluenceConsolidationEquityMethodMarket ValueMethodTradingAmortizedCostI

4、nvestments in SecuritiesReportingC2ACCOUNTING BASICS FOR DEBT SECURITIESDebt securities are recorded at cost when purchased. Interest revenue for investments in debt securities is recorded when earned. On September 1, 2009, Music City paid $29,500 plus a $500 brokerage fee to buy Dells 7%, 2-year bo

5、nds payable with a $30,000 par value. The bonds pay interest semiannually on August 31st and February 28th. Music City plans to hold the bond until they mature (HTM securities).C2ACCOUNTING BASICS FOR DEBT SECURITIESLets record the interest earned but not received onDecember 31, 2008. $30,000 par va

6、lue 7% 4/12 = $700 interest earned.On the Income Statement for the Year 2009 Interest revenue $ 700 On the Balace Sheet at December 31, 2008 Long-term investment - HTM $ 30,000 C2ACCOUNTING BASICS FOR DEBT SECURITIESOn February 28th, Music City will record the receipt of the semiannual interest. The

7、 companys accountants will make the following entry. $30,000 par value 7% 2/12 = $350 interest earned$30,000 par value 7% 6/12 = $1,050 interest receiptC2ACCOUNTING BASICS FOR DEBT SECURITIESWhen the bonds mature, Music City will receive the amount of the par value in cash. The bonds have now been r

8、etired.C2ACCOUNTING BASICS FOR EQUITY SECURITIESEquity securities are recorded at cost when acquired, including commissions or brokerage fees paid. Any cash dividends received are credited to Dividend Revenue and reported in the income statement. When the securities are sold, sales proceeds are comp

9、ared with cost, and any gain or loss is recorded.P1ACCOUNTING BASICS FOR EQUITY SECURITIESOn October 10, 2008, Music City purchases 1,000 shares of Intex common stock for $86,000 in the open market. The securities are classified by management of Music City as “available-for-sale” (AFS).P1ACCOUNTING

10、BASICS FOR EQUITY SECURITIESOn November 2nd, Music City receives a $1,720 quarterly dividend on its investment in Intex.P1ACCOUNTING BASICS FOR EQUITY SECURITIESOn December 20, Music City sells 500 shares of Intex, in the open market for $45,000.$86,000 1,000 shares = $86.00 per share cost500 shares

11、 $86 = $43,000P1The entire portfolio of trading securities is reported at its market value; this requires a “market adjustment” from the cost of the portfolio of securities. Any unrealized gain or loss from a change in the market value of the portfolio of trading securities is reported in the income

12、 statement.REPORTING OF NONINFLUENTIAL INVESTMENTSTrading securities are debt and equity securities that the company intends to actively manage and trade for profit. Frequent purchases and sales are expected.P3TechComs portfolio of trading securities had a total cost of $11,500, and a market value o

13、f $13,000, on December 31, 2008, the first year the securities were held. The $1,500 difference between cost of $11,500 and market value of $13,000 is an unrealized gain.VALUING AND REPORTING TRADING SECURITIESP3Assume TechCom sells trading securities that had cost $1,000 for $1,200 cash, on January

14、 9, 2009.VALUING AND REPORTING TRADING SECURITIESThe gain is reported in the Other Revenues and Gains section of the income statement. A loss would be reported in Other Expenses and Losses section.P3HELD-TO-MATURITY SECURITIESHeld-to-maturity (HTM) securities are debt securities a company intends an

15、d is able to hold until maturity. They are reported in the current assets if their maturity dates are within one year or the operating cycle, whichever is longer. The securities are classified as noncurrent investments if their maturity dates are longer than one year or the normal operating cycle, w

16、hichever is longer.The portfolio of HTM securities is reported at amortized cost. There is no market adjustment to the portfolio.P3AVAILABLE-FOR-SALE SECURITIESAvailable-for-sale (AFS) securities are debt and equity securities not classified as trading or held-to-maturity. They are not actively mana

17、ged like trading securities. If the intent is to sell the securities within the longer of one year or the normal operating cycle, the securities are classified as short-term investment. Otherwise, they are classified as long-term investments.Like trading securities, the AFS securities portfolio is v

18、alued at market value. This is done with a market adjustment to the total portfolio cost. Any unrealized gain or loss is reported in the equity section of the balance sheet as part of comprehensive income.P3AVAILABLE-FOR-SALE SECURITIESUnrealizedCostMarketGain (Loss)Improv bonds $ 30,000 $ 29,050 $

19、(950)Intex common stock, 500 shares 43,000 45,500 2,500 Total $ 73,000 $ 74,550 $ 1,550 Music City had no prior investments. In the current period it acquired two available-for-sale securities. At December 31, 2008, the following information is provided.P3AVAILABLE-FOR-SALE SECURITIESMusic CityParti

20、al Balance SheetDecember 31,2008Assets Long-term investments - AFS at cost $ 73,000 Market adjustment AFS 1,550 Long-term investment - AFS at market $ 74,550 Equity Add: unrealized gain on AFS securities $ 1,550 Financial statement reporting of market adjustment for Available-for-Sale securities.P3A

21、VAILABLE-FOR-SALE SECURITIESLets extend our example and assume that at December 31, 2009, the portfolio of long-term AFS securities has an $81,000 cost and an $82,000 market value.Unrealized Gain-EquityBal 12/31/08 1,550Bal 12/31/08 1,550Market Adjustment-L.T. (AFS)Adj. 12/31/09 550Adj. 12/31/09 550

22、Bal 12/31/09 1,000Bal 12/31/09 1,000Desired Account BalanceP3In some cases, influence or control may exist with less than 20% ownership.Investor Ownership of Investee Shares Outstanding0%20%50%100%Cost or Market Value MethodEquity MethodConsolidated Financial StatementsACCOUNTING FOR INFLUENTIAL INV

23、ESTMENTSP4Significant influence is generally assumed with 20% to 50% ownership.ACCOUNTING FOR INFLUENTIAL INVESTMENTSInvestor Ownership of Investee Shares Outstanding0%20%50%100%Cost or Market Value MethodEquity MethodConsolidated Financial StatementsP4Original investment is recorded at cost.The inv

24、estment account is increased by a proportionate share of investees earnings.The investment account is decreased by dividends received.INVESTMENTS IN EQUITY SECURITIES WITH SIGNIFICANT INFLUENCEP4INVESTMENT IN EQUITY SECURITIES WITH SIGNIFICANT INFLUENCE On January 1, 2008, Micron Co. records the pur

25、chase of 3,000 shares (30%) of Star Co. common stock at a total cost of $70,650 cash. P4INVESTMENT IN EQUITY SECURITIES WITH SIGNIFICANT INFLUENCE For 2008, Star reports net income of $20,000, and pays total cash dividends of $10,000 on January 9, 2009.$20,000 30% = $6,000$10,000 30% = $3,000P4INVES

26、TMENT IN EQUITY SECURITIES WITH SIGNIFICANT INFLUENCELong-Term Investment - StarDateExplanationDebitCreditBalance1/1/08Investment acquisition70,650 70,650 12/31/08 Share of earnings 6,000 76,650 1/9/09 Share of dividends 3,000 73,650 P4INVESTMENT IN EQUITY SECURITIES WITH CONTROLLING INFLUENCERequir

27、ed when investors ownership exceeds 50% of investee.Equity Method is used.Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parents control.C3ACCOUNTING SUMMARY FOR INVESTMENTS IN SECURITIESC3COMPONENTS OF RETURN ON TOTAL A

28、SSETSReturn ontotal assets=ProfitmarginTotal assetturnoverNet incomeAverage total assets=Net incomeNet salesNet salesAverage total assetsA1RETURN ON TOTAL ASSETSFiscal YearReturn on Total Assets=Profit MarginTotal Asset Turnover20079.0%=4.9% 1.84 200611.8%=6.9% 1.70 200511.1%=7.1% 1.57 Here are the

29、returns on total assets and its components for Gap, Inc. for the years 2005 through 2007:All companies desire a high return on total assets. To improve the return, the company must meet any decline in profit margin or total asset turnover with an increase in the other. Companies consider these compo

30、nents in planning strategies.A115A - INVESTMENTS IN INTERNATIONAL OPERATIONS(1) Accounting for sales and purchases listed in a foreign currency.(2) Preparing consolidated financial statements with international subsidiaries.Two major accounting challenges arise when companies have international oper

31、ations:C4Each country uses its own currency for internal economic transactions.To make transactions in another country, units of that countrys currency must be acquired.The cost of those currencies is called the exchange rate.EXCHANGE RATES BETWEEN CURRENCIESC415A SALES IN A FOREIGN CURRENCYBoston C

32、ompany, a U.S.-based manufacturer makes a credit sale to London Outfitters, a British retail company. On December 12, 2008, Boston sells 10,000 with payment due on February 10, 2009. Boston keeps its record in U.S. dollars. At the date of sale, the British pound is valued at $1.80.10,000 $1.80 = $18

33、,000C415A SALES IN A FOREIGN CURRENCYBoston Company is a December 31, year-end company. On December 31,2008, the British pound has an exchange rate of $1.84. The dollar value of the account receivable from London is $18,400 on this date. The receivable is to valued on the balance sheet at it current

34、 dollar amount.Accounts Receivable London OutfittersDateExplanationDebitCreditBalance12/12/08 Sale 18,000 18,000 12/31/08 Adjustment for foreign currency400 18,400 C415A SALES IN A FOREIGN CURRENCYOn February 10, 2009, Boston receives London Outfitters payment of 10,000. Boston immediately exchanges the pounds for U.S. dollars. The exchange rate on this date is $1.78 per pound. So, Boston receives $