When an investor can significantly influence or control the operations of the investee,including dividend declarations the equity method must be used.

Question

Quizplus · Accepted Answer

The statement is true. When an investor has the ability to significantly influence or control the investee, the equity method must be used to account for the investment. This is because the investor has the ability to exercise control over the investee's financial and operating policies, including dividend declarations. Under the equity method, the investor records its share of the investee's profits and losses on its own income statement.

When an Investor Can Significantly Influence or Control the Operations