The Equity Method of Accounting for an Investment in an Associate

question 5

Multiple Choice

The equity method of accounting for an investment in an associate includes the following steps: $\begin{array}{|l|c|c|c|c|}\hline & \text { I } & \text { II } & \text { III } & \text { IV } \\\hline \text { Recognise the initial investment at cost } & \text { Yes } & \text { Yes } & \text { No } & \text { No } \\\hline \text { Recognise the initial investment at fair value } & \text { No } & \text { Yes } & \text { Yes } & \text { No } \\\hline \text { Reduce the carrying amount by any distributions } & \text { Yes } & \text { No } & \text { No } & \text { Yes } \\\hline \begin{array}{l}\text { Adjust the carrying amount by the investor's share of } \\\text { the associate's profit or loss }\end{array} & \text { Yes } & \text { No } & \text { Yes } & \text { No } \\\hline\end{array}$

• A) I.
• B) II.
• C) III.
• D) IV.

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