If an investment accounted for using the equity method suffers an impairment loss and the value in use of the investment subsequently recovers, what accounting entry should be made?

Question

Quizplus · Accepted Answer

According to the equity method, impairment losses are recognized in the income statement and reduce the carrying amount of investment. If the value in use of the investment subsequently recovers, the carrying amount can be increased, but not more than the amount of the impairment loss that was recorded at the time of impairment. Option A is incorrect because revaluation surplus is not recognized under the equity method. Option C is incorrect because the revaluation gain cannot be recognized in net income under the equity method. Option D is incorrect, as noted in the explanation for option B.

If an Investment Accounted for Using the Equity Method Suffers