When significant influence exists,the investment should be accounted for by the equity method.

Question

Quizplus · Accepted Answer

According to accounting standards, when an investor has significant influence over the operating and financial policies of an investee, the investment must be accounted for by the equity method. This means that the investor recognizes its share of the investee's net income or loss each period, reported on the income statement, and adjusts the carrying value of its investment to reflect changes in the investee's equity.

When Significant Influence Exists,the Investment Should Be Accounted for by the Equity