Question

Alibaba Group Initial Public Offering: A Case Study of
Financial Reporting Issues
Qing L. Burke
Tim V. Eaton
Miami University

needs codification references

Q7. Research FASB ASC Topic 323 (FASB 2014c) (and 320 [FASB 2014b]) in the accounting for investments to answer the following questions related to Yahoo!’s investment (assume the fair value option is not elected):

How should Yahoo! recognize and measure its 46 percent ownership in Alibaba Group for the fiscal year ended December 31, 2005?

How should Yahoo! recognize and measure its 24 percent ownership in Alibaba Group for the year ended December 31, 2012?

How should Yahoo! recognize and measure its 15 percent ownership in Alibaba Group for the year ended December 31, 2014?

Answer 1

A. 46% ownership

Equity method of accounting would be used and the investments would be recorded at the amount of considerationd being paid and the amount of earnings and dividend would directly affect the amount of investments in Alibaba group i.e earnings would increase the investments and dividend would redce the amount of investment value.

B. 24% ownership

Equity method of accounting would be used to account for the 24% ownership also , same as in A.

C. 15% ownership

Cost method of accounting would be used to account for this investment and would be recorded at the cost of consideration being paid and would be adjusted for the fair vale and the amount of dividend would be recorded as investment income in the income statement and would not be adjusted for earnings of Alibaba group and any dividend in excess of earnings would reduce the amount of investments in Alibaba group.