With the equity method, the investor recognizes its share of the earnings of the subsidiary when the

Question

Quizplus · Accepted Answer

With the equity method, the investor recognizes its share of the earnings of the subsidiary when the investee reports earnings on its income statement. This is usually done on a regular basis, such as quarterly or annually, and the investor records its share of the earnings based on its ownership percentage in the subsidiary. This is different from recognizing dividends, which only occur when the investee actually pays out cash to its shareholders.

With the Equity Method, the Investor Recognizes Its Share of the Earnings