If a company acquires a 40% common stock interest in another company:

Question

Quizplus · Accepted Answer

According to accounting standards, when a company acquires a 40% common stock interest in another company, it is presumed to have significant influence over the investee's activities. Therefore, the equity method is usually applicable to account for the investment. Under the equity method, the investor recognizes its share of the investee's net income and adjusts the carrying value of the investment accordingly.

If a Company Acquires a 40% Common Stock Interest in Another