Delaney Entity has an equity investment that it has been holding for ten years that no longer meets the requirements to be classified as such. Delaney must reclassify the instrument as a liability at current book value.

Question

Quizplus · Accepted Answer

Equity investments are classified based on the level of control or influence the investor has over the investee, and changes in classification typically relate to changes in ownership percentage or strategic influence, not to a reclassification as a liability. Reclassification to a liability would imply an obligation to return resources to another entity, which does not align with the nature of an equity investment.

Delaney Entity Has an Equity Investment That It Has Been