How must a not-for-profit organization account for a portfolio investment it has made in profit-seeking entity?

Question

Quizplus · Accepted Answer

A not-for-profit organization should account for its portfolio investment in a profit-seeking entity using the cost method. This method involves recognizing the investment on the balance sheet at its cost and recognizing any dividends received as income in the period received. The equity method and proportionate consolidation are used for investments in entities where the not-for-profit has significant influence or control, which is typically not the case in portfolio investments. Consolidation is not appropriate for portfolio investments as the not-for-profit does not have control over the profit-seeking entity.

How Must a Not-For-Profit Organization Account for a Portfolio Investment