The degree of control over an investee determines how the investor accounts for the investment.

Question

Quizplus · Accepted Answer

This statement is true. If an investor has a high degree of control over an investee, they may consolidate the financial statements of the investee with their own, whereas if they have a low degree of control, they may classify the investment as a passive investment and account for it using the equity method or fair value method.

The Degree of Control Over an Investee Determines How the Investor