When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the level of ownership rises from less than 20% to a range of 20% to 50%, the equity method typically would become appropriate and the investment account balance should be:

Question

Quizplus · Accepted Answer

When changing to the equity method due to a change in ownership level, the investment account balance should be retroactively adjusted to the balance that would have existed if the equity method had been in effect for prior years. This is done to ensure consistency in financial statements and to provide accurate information to users.

When the Investor's Level of Influence Changes, It May Be