Question
The degree to which one corporation (investor) acquires an interest in the voting stock of another corporation (investee) generally determines the accounting treatment for the
The degree to which one corporation (investor) acquires an interest in the voting stock of another corporation (investee) generally determines the accounting treatment for the investment subsequent to acquisition. Investments by one corporation in the voting stock of another and the accounting method to be used can be classified according to the percentage ofthe voting stock of the investee held by the investor:
Holdings Valuation
a. Less than 20% Fair value method
b. Between 20% and 50% Equity method
c. More than 50% Consolidated statements
Discuss the differences between the three valuation theories: Fair value method, equity method and consolidated statements. From an accounting perspective, what are the differences between the three? How does each valuation appear on the financial statements?
Post a substantive response to the question (minimum 250-300 words).
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