Question
Asked Feb 14, 2020
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Although the equity method is a generally accepted accounting principle (GAAP), recognition of equity income has been criticized. What theoretical problems can opponents of the equity method identify? What managerial incentives exist that could influence a firm’s percentage ownership interest in another firm?

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The equity method has been criticized due to the fact that it allows the investors to recognize the income which may not be received in any usable form in the near future. Income is being accrued based on the investee’s accounted in...

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