Question
14. A number of losses or other factors could indicate that the market value of an investment accounted for under the equity method has decreased
14. A number of losses or other factors could indicate that the market value of an investment accounted for under the equity method has decreased to an amount below its current book value. If this decrease is considered to be not temporary (other than temporary, the investor must:
a. Recognize an impairment loss in the statement of income and expenses and reduce the book value of the investment to market value. It will continue to account for the investment under the equity method.
b. Recognize an impairment loss in the statement of income and expenses and reduce the book value of the investment to market value. It will NOT continue to account for the investment under the equity method.
c. You will ignore the decrease in market value, because you are using the equity method.
d. You will recognize the loss as OCI.
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