There Are Three Levels of Influence or Control by an Investor

question 21

Essay

There are three levels of influence or control by an investor over an investee which determine the appropriate accounting treatment. Identify and briefly describe the three levels and their accounting treatment.

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Definitions:

Opportunity Cost

The most valuable alternative that is given up if a particular investment is undertaken.

Incremental Cost

The additional cost incurred to produce one more unit of a product or service.

Accounts Receivables

The money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Cash Inflows

Money or value entering a company, often from operations, financing, or investing activities, contributing to the company's cash position.