When the Investor's Level of Influence Changes, It May Be

question 43

Multiple Choice

When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the level of ownership rises from less than 20% to a range of 20% to 50%, the equity method typically would become appropriate and the investment account balance should be:

• A) Retrospectively adjusted to the balance that would have existed if the equity method had been in effect for prior years.
• B) Carried over as is with no adjustment necessary.
• C) Carried over at the fair value that exists on date of transfer.
• D) Adjusted to reflect amortized cost.

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