Stora Enso Data
The calculation of the investment activity of any company can be carried out in various ways, but each of them requires an integrated approach. Portfolio diversification in organizations can be a whole system, the individual components of which require their methodology, taking into account legal specifics. An associate is a company in which the investor has significant influence but is neither a subsidiary nor a joint venture. Significant influence refers to the ability to participate in, but not control over, the financial and operating policy decisions of the investee (Chen et al., 2021).
If an investor directly or indirectly, including through subsidiaries, owns at least 20 percent of the voting shares, then the company is recognized as an associate (Jiang & Chen, 2019). The historical cost of an asset at the time of its acquisition or creation is the number of costs incurred to acquire or create that asset, which includes the consideration paid to acquire or create that asset plus the transaction costs identified in these notes.
Associates are accounted for using the equity method unless they qualify for recognition as assets held for sale following IFRS. Under the equity method, an investment in an associate is initially recognized at cost, and then its carrying amount is increased or decreased by recognizing the investor’s share of the profit or loss of the investee in subsequent acquisition periods (Pavlopoulos et al., 2019). In addition to these notes, the value of companies can be calculated using the indicators in the cash flow from investing activities article, which indicates the amount of acquisition and sale of assets in a certain period, which is reflected in the balance sheet as a result.
In other companies, the picture is similar: the components also include acquisition cost, which means the number of acquisition costs, translation differences, reflecting the difference in currencies, additions, and disposals – purchases and sales, and write-downs, reflecting changes in value. At the same time, transfers from associated companies are also recorded in income to assets and constitute another note article. The number at the end of 1999 is positive in terms of dynamics compared to last year, although on closer examination last year there were more acquisitions, while transfers accounted for the bulk of this year.
Comparison
Pechiney uses a cash flow approach and reflects the dynamics more broadly – over three years instead of two. An investor should get data in two ways, but this is rarely seen in practice. Pechiney’s approach reflects a company’s liquidity, while Stora Enso focuses on differentiating share performance regardless of the organization’s overall net income. In the first case, one can get a broader picture and more clearly compare the operating and research activities of the company in comparison with the investment (Raimo et al., 2020). In the case of Stora Enso, the report is more diversified in terms of investment assets, where one can better track their dynamics and movement, drawing more adequate conclusions to assess the company’s attractiveness. However, for the most part, the reports are pretty similar in terms of their constituent components and the approaches to adding and subtracting assets. Differentiation into associates and other companies in Stora Enso also favors a deeper valuation of equity-type assets, while Pechiney gives better horizontal dynamics. In any case, investors should use this information as a starting point for further research into the company to comprehensively assess the risks and potential returns.
References
Chen, D., Wang, F., & Xing, C. (2021). Financial reporting fraud and CEO pay-performance incentives. Journal of Management Science and Engineering, 6(2), 197-210. Web.
Jiang, H., & Chen, J. (2019). Short selling and financial reporting quality: Evidence from Chinese AH shares. Journal of Contemporary Accounting & Economics, 15(1), 118-130. Web.
Pavlopoulos, A., Magnis, C., & Iatridis, G. E. (2019). Integrated reporting: An accounting disclosure tool for high quality financial reporting. Research in International Business and Finance, 49, 13-40. Web.
Raimo, N., Vitolla, F., Marrone, A., & Rubino, M. (2020). The role of ownership structure in integrated reporting policies. Business Strategy and the Environment, 29(6), 2238-2250. Web.