The equity method is questionable in terms of both relevance and representational faithfulness.

Question

Quizplus · Accepted Answer

The equity method has limitations in terms of both its relevance and representational faithfulness. It may not accurately reflect the economic reality of the investee's financial performance and may result in overstatement or understatement of the investor's share of earnings and assets. Additionally, it does not provide a clear indication of the investee's financial position or liquidity. Therefore, the equity method is not universally accepted and may not be appropriate in certain circumstances.

The Equity Method Is Questionable in Terms of Both Relevance