Explain the Following Statement

question 33

Essay

Explain the following statement:
'When reconciling the investor's interest in an associate's net assets to the equity accounted carrying amount of the investment in the investor's financial statements,the unimpaired balance of goodwill will be a reconciling item.'

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Definitions:

Financial Risk

The potential for monetary loss in investing or engaging in a business enterprise.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

M&M Proposition I

Modigliani and Miller Proposition I states that in a world without taxes, bankruptcy costs, and asymmetric information, a firm's value is unaffected by how it is financed, whether by debt or equity.

Law Of One Price

An economic theory that states that in efficient markets, identical goods must have only one price.