Reference no: EM132622282

Respond fully to each question, remembering to clearly cite the guidance source for each response.

Purchase of an Investment

An investor has just purchased a 15% share in the equity of a private company and has the right to appoint a member to the private company's 5-member board. The investor is asserting to his auditor that the investment does not qualify for the equity method of accounting since his interest is below 20%. Locate the guidance applicable to this issue and evaluate the strength of the investor's argument. Identify questions you might ask if you are the investor's auditor.

Investments Held in Company Pension Plan A company's existing defined benefit pension portfolio holds certain investments in private companies, which do not have a quoted exchange price. Determine what measurement basis the company must apply to these private company investments within its pension portfolio. Explain.

Problem 1: Hazardous Chemical Leak A manufacturing plant has leaked hazardous chemicals into a pond on the plant's property. The leaking of these chemicals violates state environmental protection regulations. What accounting is required for this leakage? Does the government need to be aware of the leak before the company must account for the cost of remediation?