The Salvation Society, a not-for-profit organization, owns 5% of the shares of the Mobile Meals Inc., a for-profit organization. The two organizations operate independently and have no board members in common. How should the Salvation Society account for its investment in Mobile Meals Inc.?

Question

Quizplus · Accepted Answer

Salvation Society should account for its investment in Mobile Meals Inc. at cost, as it is a non-controlling interest of 5%. The equity method or consolidation would be appropriate if Salvation Society had control or significant influence over Mobile Meals Inc., but this is not the case here. A note disclosure may also be necessary to disclose the investment and related information in the financial statements.

The Salvation Society, a Not-For-Profit Organization, Owns 5% of the Shares