If an investor holds between 20 and 50 percentage of the voting stock of the investee, significant influence is normally fabricated and the equity method applied.
2.What indicates an investors ability to significantly influence the decision-making handle of an investee?
Investor representation on the board of directors of the investee.
Investor participation in the political process of the investee.
Material intercompany transactions.
Inter stir of managerial personnel.
Technological dependency.
terminus of ownership by the investor in relation to the size and dumbness of other ownership interests in the investee.
3.Why does the equity method record dividends received from an investee as a reduction in the investment account, not as dividend income?
The investors investment account is ebb whenever a dividend is collected.
Because distribution of cash dividends reduces the book value of the investee company, the investor mirrors this change by recording the receipt as a precipitate in the carrying value of the investment rather than as revenue. formerly again, a parallel is established between the investment account and the underlying activities of the investee: The reduction in the investees owners equity creates a decrease in the investment. Furthermore, because the investor immediately recognizes income when the investee earns it, double counting would occur if the investor to a fault recorded subsequent dividend collections as revenue. Importantly, the collection of a cash dividend is not an appropriate point for income recognition. Because the investor can influence the measure of investee dividend distributions, the receipt of a dividend is not an objective measure of...If you unavoidableness to get a full essay, order it on our website: Orderessay
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