Answered: What is the classification of Equity…

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Accounting

What is the classification of Equity investments for which the investor does not have significant influence?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 8DQ: How does the equity method discourage the manipulation of net income by investors?

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Question

What is the classification of Equity investments for which the investor does not have significant influence?

Expert Solution

Step 1

When a equity investment is made and if such investment does not result in significant influence, then such investment should be classified as Current or Non current asset depending on estimated holding period of such investment.

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which reporting categories are used to account for equity investments when the investor lacks the ability to significantly influence the operations of the investee?
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