Investments accounted for by the equity method are initially recorded at market value.

Question

Quizplus · Accepted Answer

Investments accounted for by the equity method are initially recorded at cost, which is the price paid for the investment plus any additional costs incurred to acquire it. The equity method is used to account for investments where the investor has significant influence over the investee, but does not have control over it. Under this method, the investor records its share of the investee's profits or losses in its own financial statements.

Investments Accounted for by the Equity Method Are Initially Recorded