Asked by Adarsh Prasad on Jun 07, 2024
Verified
What argument could be made against the equity method?
Equity Method
A method for recording investments in which the investor acknowledges its share of investee profits and losses in proportion to its ownership.
Income Recognition
The process by which revenue is accounted for and recorded on the financial statements in the period it is earned and can be reliably measured.
- Evaluate and audit the appropriateness of using the equity method for investment accounting.
Verified Answer
KB
kenya bernalJun 12, 2024
Final Answer :
An argument could be made against the recognition of income under the equity method. The investor is required to recognize its share of the investee's income even when it is unlikely that the investor will ever receive the entire amount in cash dividends.
Learning Objectives
- Evaluate and audit the appropriateness of using the equity method for investment accounting.