Equity Method and Joint Ventures

Question 1

Equity method is used when there is ____ to _____ ownership and the company exercises ______ ______

Answer 1

20%; 50%; significant influence

Question 2

Ways to exercise significant influence without 50% ownership (2):

Answer 2

largest shareholder

majority of the board

Question 3

When the difference between the purchase price is due to an asset FV difference, that difference must be:

Answer 3

amortized over the related asset life

Question 4

A difference between the purchase price and fair value of the investee’s net assets is attributable to:

Answer 4

goodwill

Question 5

Under both GAAP and IFRS, investors generally account for joint venture investments using the:

Answer 5

equity method

Question 6

A step-by-step acquisition involves:

Answer 6

changing from the cost method to the equity method

Question 7

When a change from the cost method to the equity method happens, the investment account and the RE account are adjusted ___________ for the difference between the AFS classification/cost method to the equity method

Answer 7

retrospectively

Question 8

When changing from cost method to equity method, apply the new method to the ______ ______ percentage

Answer 8

prior period

Question 9

Dividends are not included in _________ income

Answer 9

investment