10 Questions
In financial accounting, when is control over an investee's operation recognized?
When a stockholder accumulates more than 50% of an organization's outstanding voting stock.
According to FASB ASC Section 810-10-05, what allows for the use of consolidated financial statements?
Financial control through contracts.
Under the cost method for equity investments, how are unrealized holding gains or losses treated?
Included in earnings with no adjustment to the investment account.
What conditions allow for financial statement recognition under the cost method for equity investments?
Observable price changes in orderly transactions.
How are assets and liabilities treated in financial reporting when two companies are combined due to investor control?
Both assets and liabilities are combined into one set of financial statements.
According to the passage, which statement is true regarding investments in equity securities without readily determinable fair values?
These investments may be measured at cost if they provide neither significant influence nor control.
How are investments in equity securities that employ the cost method typically reported over time?
They are reported at their original cost over time.
What typically constitutes the income from cost method equity investments?
The investor's share of dividends declared by the investee.
According to the passage, when must cost method equity investments be assessed for impairment?
Periodically, to determine if the fair value is less than the carrying amount.
If impairment is deemed likely for a cost method equity investment, what must an entity do according to the passage?
Estimate a fair value for the investment to measure the amount (if any) of the impairment loss.
Learn about the cost method used for investments in equity securities when the fair value is not readily determinable and the investment does not provide significant influence or control. Explore how these investments are measured at cost.
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