The main guidance on equity-method reporting,found in ASC 323 and 325 requires all of the following except:
A) The investor's share of the investee's extraordinary items should be reported.
B) The investor's share of the investee's prior-period adjustments should be reported.
C) Continued use of the equity-method even if continued losses results in a zero or negative balance in the investment account.
D) Preferred dividends of the investee should be deducted from net income before the investor computes its share of investee earnings.

Question

Quizplus · Accepted Answer

The guidance in ASC 323 and 325 require the reporting of the investor's share of the investee's extraordinary items and prior-period adjustments (choices A and B), as well as the deduction of preferred dividends from net income before computing the investor's share of earnings (choice D). However, the guidance does not require the continued use of the equity-method if continued losses result in a zero or negative balance in the investment account (choice C).

The Main Guidance on Equity-Method Reporting,found in ASC 323 and 325