C2-1 - C2-1 Choice of Accounting Methoda. The equity method...

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Unformatted text preview: C2-1 Choice of Accounting Methoda. The equity method is to be used when an investor has significant influence over an investee. Significant influence normally is assumed when more than 20 percent ownership is held. Factors to be considered in determining whether to apply equity-method reporting include the following:1. Is the investee under the control of the courts or other parties as a result of filing for reorganization or entering into liquidation procedures?2. Does the investor have representation on the board of directors, or has it attempted to gain representation and been unable to do so?3. Has the investee initiated litigation or complaints challenging the investor's ability to exercise significant influence?4. Has the investor signed an agreement surrendering its ability to exercise significant influence?5. Is majority ownership concentrated in a small group that operates the company without regard of the wishes of the investor?...
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This note was uploaded on 02/19/2011 for the course ACC 440 taught by Professor Henderson during the Spring '08 term at University of Phoenix.

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