Fisher Corporation has the following investments at September 30, 2012: What method of accounting will Fisher use to account for its investment in Cookstown if this investment is classified as an associate?

Question

Fisher Corporation has the following investments at September 30, 2012:  What method of accounting will Fisher use to account for its investment in Cookstown if this investment is classified as an associate?

Quizplus · Accepted Answer

If Fisher's investment in Cookstown is classified as an associate, it must use the equity method of accounting. This method involves recognizing the investment initially at cost and then adjusting the carrying amount over time based on its share of the investee's net assets and income. It is the appropriate method for investments in which Fisher has significant influence over the operating and financial policies of the investee, but does not have control. The other methods listed are not applicable for an investment classified as an associate.

Fisher Corporation Has the Following Investments at September 30, 2012