If a write-down has been made to the parent's investment under the cost method, the investment account cannot be written back up to the original cost amount if the subsidiary later becomes profitable.

Question

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Under the cost method, once a write-down has been made to an investment, it cannot be reversed or written back up to the original cost amount, even if the subsidiary later becomes profitable. This is in accordance with accounting principles which generally prohibit the reversal of impairment losses on equity investments.

If a Write-Down Has Been Made to the Parent's Investment