Unrealized gains on equity securities when the investor has insignificant influence are reported on the:
A)statement of cash flows as investing activities.
B)balance sheet as an element of other comprehensive income.
C)statement of cash flows as financing activities.
D)income statement as Other Income.

Question

Quizplus · Accepted Answer

Unrealized gains on equity securities when the investor has insignificant influence are reported on the income statement as Other Income. This is because under current accounting standards (e.g., US GAAP and IFRS), changes in fair value of such equity investments are recognized in net income unless the investments are accounted for under the equity method or are otherwise required to be accounted for at fair value through other comprehensive income.

Unrealized Gains on Equity Securities When the Investor Has Insignificant