8 - Accounting Methods for Long-Term Investments Percent owned by investor Accounting method Up to 20 Available-for-Sale 20 50 Equity Method More

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Long-Term Investments and International Operations Stock Investments Investor – entity that owns stock of a corporation Investee – corporation that issued the stock ABC Company purchases 1000 shares of XYZ Corporation: ABC is the investor XYZ is the investee Reporting Investments on the Balance Sheet Assets to the investor Short-term investments Also called marketable securities and often classified as trading securities Must be liquid Intended to be converted to cash within one year Long-term investments Expected to be held longer than one year
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Unformatted text preview: Accounting Methods for Long-Term Investments Percent owned by investor Accounting method Up to 20% Available-for-Sale 20 - 50% Equity Method More than 50% Consolidation Available-for-Sale Investments • Can be classified as current or long-term Based on how long management intends to hold the investment • Initially recorded at cost • Cash dividends received are recorded as revenue Stock dividends indicated by memorandum • Reported at market value on the balance sheet Considered more relevant for decision making...
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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8 - Accounting Methods for Long-Term Investments Percent owned by investor Accounting method Up to 20 Available-for-Sale 20 50 Equity Method More

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