11. [Control requirement for consolidation] On April 12, 1996. Ford Motor Company [F] announced an increase in its owner- ship of Mazda Motor [7261], a Japanese company, from 25 to 33.4%. The infusion of $481 million of additional equity was re- quired by Mazda's weak financial condition. The announcement also stated that ' Henry Wallace, a Ford executive, would be President of Mazda. Additional Ford personnel would be added to Mazda management Mazda's board contains seven Ford-nominated directors, four of whom hold executive positions in Mazda. The Economist (April 20. 1996, p. 57) stated that these changes give Ford "de facto control" over Mazda. Ford accounts for its investment in Mazda using the equity method of accounting.

a. Discuss the effect of the increase of ownership on Ford's ac- counting for the Mazda investment under current U.S. GAAP.