How to account for the original 30% investment in Bream Ltd.

     Initially recorded at fair value plus transaction cost, based on Para 43 of AASB 139.

 Facts: According to Para 43 of AASB 139, the investment must be recorded at the date of acquisition according to the fair value of the price of shares before further negotiation. Fair value means the price of the share at the current time so it is necessary to record the investment price at fair value and also its transaction costs.

Possibilities: According to AASB 139, the investment and assets must be recognized at the fair value with the transaction cost to determine the current profit and also maintain the record of the organization on a fair value basis. When the 30% investment is converted into the original owner then their value must be determined at fair value with the transaction cost that spends by the company who convert the share and having complete authority.

Solutions: The Company measures the investment according to a fair value basis and manages all the prices changes according to the current market situation. It is also necessary to measure all the assets of the company with the investment at fair value to determine their real price and consider the profitability ratio after taking a share of investment and then convert into real ownership of the company. (Legislation, 2004)

-          Subsequently accounted for under IAS 39 e.g. could be measured at fair value with changes

o   In value included in profit or loss or change recognized directly in equity.

Facts:  the company has to measure the investment cost at fair value according to IAS 39. It also determines how the company records the investment amount at the date of acquisition and the current date of what is the value of the company going to be. Under IAS 39, the company has to measure its all the financial instruments, its financial liabilities, and equity according to changing prices in the market. It is necessary to measure the price at fair value to determine the real profit or loss of the company and earn how to enhance the profitability of the company.

Possibilities:  it is necessary to measure the price of an investment in real price at the time to acquisition but when its reuse to convert into some other form then the company must measure its price at fair value because the company has to manage its financial report and at the time of acquiring the shares of the other company, company has to determine all the prices and rates ineffective way to generate more income and consider that is the acquisition provide benefit to the company or not.

Solution: The company must follow IAS 39 to recognize all the assets and liabilities and also equity that involves in the company through major transactions. The company obtains the equity before 6 months but now when it's converted into the real ownership then the company has to consider its current price which is its fair value and also determine its transaction costs that company has to pay and then determine how much the company earn profit or loss in measuring the price of investment and how much the company obtain benefit from all these elements. This is the responsibility of the company to determine the price of equity at fair value and effectively manage its accountability. (IASPLUS, 2019)

-          On the formation of the business combination, Para 42 of AASB 3 requires that the acquirer remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resultant gain/loss in profit or loss where the investment had been measured at fair value with increments recognized directly in equity, these amounts are transferred at acquisition date to profit or loss as well and disclosed as reclassification adjustments.

Facts: according to AASB 3 Para 42, the company has to measure its equity at the time of acquisition and also at the date when the equity determines at fair value according to changing authority ratio. This is very important to determine the fair value of the equity and assets for the company because its real value explains with all these terms and elements.

Possibilities: If the company can’t measure its fair value of the equity and assets then the real value never explains in true parameters. Different accounting standards are prepared for this purpose to explain what the real purpose is and the real value of all the elements involve in the company. The value and worth of the company also determine according to these determinants and explain the worth of the company in the market according to its authority and performance measurements.

Solutions: the company must revalue and remeasure its all the investment, equity, and assets according to the current time and adequately measure its value. By using different standards of accounting the company provides a better outcome and explains its all areas that are also considered for many other stakeholders. (Legislation, 2004)

Reference of How to account for the original 30% investment in Bream Ltd

IASPLUS. (2019). IAS 39 — Financial Instruments: Recognition and Measurement. Retrieved from https://www.iasplus.com/en/standards/ias/ias39

Legislation. (2004, July). AASB 139 - Financial Instruments: Recognition and Measurement. Retrieved from https://www.legislation.gov.au/Details/F2014C00769

Legislation. (2004, July). AASB 3 - Business Combinations. Retrieved from https://www.legislation.gov.au/Details/F2005B01399

Speech: According to the company and its investment, when the company converts its authority ratio and its minor share change into complete share then the value of all the financial assets, liabilities, equity, and debts are changed according to changing time. AASB 139, IAS 39, and many different accounting standards are prepared to provide help to a different organization to revalue all elements at fair value with the transaction cost and determine how much the company is going to generate profit or loss while changing its position. The fair value record of the companies is important in this regard as the company wants to utilize all the efforts and determine its real price on the date when the company moves to a new position and all the previous responsibilities and designations are going to change according to new criteria. So it is important for the company to convert its all elements at fair value and also calculate its real price at the time of acquisition of new shares and obtaining new authority.