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

question 45

Multiple Choice

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 discontinued operations 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 result 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.

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Definitions:

Full Disclosure

Full disclosure is a policy requiring companies to provide all relevant, material information about their operations, financial condition, and management to investors and stakeholders.

SEC

The United States Securities and Exchange Commission is a federal body tasked with overseeing the securities market and safeguarding investors.

Fair Price

The equilibrium price for a good or service in the market where the quantity supplied equals the quantity demanded.

Exercise Price

The predetermined price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.