Accounting Study Guide

U.S. GAAP
Financial Reporting Guide

Section 3420: Cost Method Investments

[U.S. GAAP Codification Topic]
325 Investments - other
325-10 Overall
325-20 Cost method investments

1. Investments in equity securities
(1) If fair value is readily determinable
--> Apply ASC 320 Investments - Debt and Equity Securities
--> SFAS 115
(2) If fair value is not readily determinable and
--> Less than 20% of voting rights
--> Apply ASC 325-20 Cost Method Investments

2. Initial measurement
Investments are measured --> at cost

3. Subsequent measurement
(1) Dividends from an investee
--> recognized as earnings from investment

(2) Dividends over the accumulated earnings of an investee
--> return of investment, not earnings from investment

3. Impairment
A decrease in investment is recognized
--> if the decrease is "other than temporary"