1. Assume Big bought a small amount of stock in Little in Year 1, and properly used the fair value method to account for this investment. In Year 2, it bought enough extra stock that it should use the equity method. True or false: Big should restate its Year 1 financial statements to show the investment as if it had used the equity method.
2. True/False: Under the equity method of accounting for investments, an investor must record an impairment loss when there is a permanent decline in the value of the investment.