Abbott Laboratories reports its 50% joint venture investment in TAP Pharmaceutical Products Inc. using the equity method
Question:
Abbott Laboratories reports its 50% joint venture investment in TAP Pharmaceutical Products Inc. using the equity method of accounting in its 2007 10-K. The Abbott balance sheet reports an investment balance of $159 million. TAP has total assets of $1,354.2 million, liabilities of $1,036.7 million, and equity of $317.5 million. Abbott's investment balance is, thus, equal to its 50% interest in TAP's equity ($317.5 million X 50% = $158.75 million, rounded to $159 million). What adjustment(s) might we consider to Abbott's balance sheet before we forecast its financial statements? (Hint: Consider the distinction between operating and nonoperating assets and liabilities.) What risks might Abbott Laboratories face that are not revealed on the face of its balance sheet?
Step by Step Answer:
Financial And Managerial Accounting For MBAs
ISBN: 9781618533593
6th Edition
Authors: Peter D. Easton