Significant Influence

Question 1

Significant Influence

Answer 1

When a company owns 20 to 50% of another company. More than 50% would mean consolidation.

Question 2

Equity Method Accounting

Answer 2

1. Record Investment at cost.
2. Capture investee’s book values and fair values at date of investment
3. Identify and allocate any difference between cost and book value

Also record your share of investee’s income and dividends.

Question 3

Dividends from a company that you have significant influence over.

Answer 3

Under the equity method dividends reduce the investment account. They are not included in income.

Question 4

Calculating carrying amount of an equity method investment

Answer 4

Begginning balance + portion of income - portion of dividends = ending carrying value.