U.S.GAAP and IFRS require firms to account for minority, active investments, using the _____ method.

Question

Quizplus · Accepted Answer

Both U.S.GAAP and IFRS require firms to account for minority, active investments using the equity method. This involves recognizing the investor's share of the investee's profits or losses on the income statement and adjusting the value of the investment on the balance sheet for changes in the investee's net assets. The cost method (A) involves accounting for investments at their original cost, whereas the fair market value method (C) involves adjusting the value of the investment on the balance sheet to reflect the current market value. Consolidation (D) is used when a firm has a controlling interest in another entity, while the lower of cost or market method (E) is typically used for inventory valuation, not investments.

USGAAP and IFRS Require Firms to Account for Minority, Active