Asked by Mohamed Abushamma on Jun 25, 2024
Verified
When an investor reporting under IFRS owns more than 20% of the common shares of a corporation, it is generally presumed that the investor
A) has insignificant influence on the investee and that the cost method should be used to account for the investment.
B) should use the fair value through profit or loss model to account for the investment.
C) will prepare consolidated financial statements.
D) has significant influence on the investee and that the equity method should be used to account for the investment.
Significant Influence
The power to participate in the financial and operating policy decisions of an investee but not control those policies, typically through ownership of a substantial share of voting stock.
IFRS
International Financial Reporting Standards, which are accounting standards issued by the International Accounting Standards Board (IASB) for financial reporting globally.
Equity Method
An accounting technique used in consolidating the financial statements of entities in which an investment has been made and significant influence is held.
- Comprehend the categorization of investments and the conditions for employing the equity method.
- Understand the repercussions of dominant influence and control within investment accounting.
Verified Answer
Learning Objectives
- Comprehend the categorization of investments and the conditions for employing the equity method.
- Understand the repercussions of dominant influence and control within investment accounting.
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