When an entity reduces its interest in an investment in equity securities accounted for by the equity method,and changes to the fair value method,what is the initial cost value for purposes of subsequent changes in market value?

Question

Quizplus · Accepted Answer

When an entity reduces its interest in an investment in equity securities accounted for by the equity method and changes to the fair value method, the initial cost value for purposes of subsequent changes in market value is the book value at the date of the change. This is because the fair value method requires that the investment be measured at fair value on the date of the change, and the book value at that date represents the original cost of the investment. Therefore, choice B is the best option.

When an Entity Reduces Its Interest in an Investment in Equity