An Advantage of the Equity Method Over the Fair Value

question 23

True/False

An advantage of the equity method over the fair value method is that it prevents an investor from manipulating its own income by exerting influence over the amount and timing of investee dividends.

---

Definitions:

Expense Account

An account used to record expenses in accounting, representing money spent or costs incurred in an entity's operations to generate revenues.

Closing Journal Entries

Entries made at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts, preparing the books for the next period.

Dividends

Funds distributed to shareholders by a company, typically from its earnings.

Retained Earnings

The portion of a business's profits not distributed to shareholders but reinvested in the business or kept as a reserve.