In the process of conversion from the equity method to the fair value method, the earnings or losses that the investor previously recognized under the equity method should:
A) be ignored.
B) be subtracted from the carrying value of the securities.
C) remain as a part of the carrying amount of the investment.
D) be shown in the income statement.

Question

Quizplus · Accepted Answer

Under the equity method, the investor's share of the investee's earnings or losses is recognized in the carrying amount of the investment. When converting to the fair value method, these previously recognized earnings or losses remain as part of the carrying amount of the investment, as they have already been reflected in the investor's equity in the investee.

In the Process of Conversion from the Equity Method to the Fair