When the parent has temporarily discontinued applying the equity method because of the subsidiary's substantial operating losses, the parent resumes application of the equity method when the subsidiary's retained earnings becomes positive.

Question

Quizplus · Accepted Answer

The parent resumes application of the equity method not when the subsidiary's retained earnings become positive, but rather when the investee returns to profitability and the investor's share of profits equals the share of losses not recognized during the period the equity method was suspended.

When the Parent Has Temporarily Discontinued Applying the Equity Method