Analyzing and Interpreting Disclosures on Equity Method Investments Headquartered in 1i’ronto,…
Analyzing and Interpreting Disclosures on Equity Method Investments
Headquartered in 1i'ronto, Rogers Communications Inc. is a diversified public Canadian communications and media company. It operates wireless communications, cable television, telephone, and Internet connectivity with significant additional telecommunications and mass media assets. In August 2012, Rogers acquired a 37.5% equity interest in Maple Leaf Sports & Entertainment Ltd. C MLSE”). MLSE, one of Canada's largest sports and entertainment companies, owns and operates the Air Canada Centre, the NHL's Toronto Maple Leafs, the NBA's Toronto Raptors, the MLS' Toronto FC, and the AHL's Toronto Marlies. The Company's net cash investment was $540 million and investment in MLSE is accounted for using the equity method. Rogers follows IFRS.
a. How is the MLSE investment reflected on Rogers' balance sheet.
b. How, generally, is income recognized on this sort of investment?
c. Does the $540 million investment reported on Rogers' balance sheet sufficiently reflect the assets and liabilities required to conduct all of MLSE’s operations? Explain.
d. Do the liabilities of MLSE’s represent actual obligations to Rogers? Explain.
e. What potential problem(s) does equity method accounting present for analysis purposes?