|
Section 3430: Investments in Associates
[U.S. GAAP Codification Topic]
323 Investments - Equity method and joint ventures
323-10 Overall
[U.S. GAAP before the Codification]
APB 18, March 1971, The Equity Method for Accounting for Investments in Common Stock
SFAS 12, December 1975, Accounting for Certain Marketable Securities, Superseded by SFAS 115, in 1993
SFAS 115, May 1993, Accounting for Certain Investments in Debt and Equity Securities
1. Initial measurement under equity method
--> investments are measured at cost
2. Subsequent measurement under equity method
(1) Investor's share of (B)
--> is recognized in the investor's financial statements
(B) Earnings or losses of an investee
(2) Investor's share of (C)
--> adjusts the investor's other comprehensive income
(C) Other comprehensive income
(3) Investor's share of (B) and (C)
--> adjusts the carrying amount of the investor's investment
3. Equity method losses
Investor's share of losses of an investee
--> is recognized up to
--> the carrying amount of the investor's investment
4. Equity method goodwill: Basis difference
(1) If investment cost > investor's share of net assets
--> the difference between two
--> is recognized as "equity method goodwill"
(2) Equity method goodwill is not amortized.
(3) Impairment test for goodwill, SFAS 142,
--> is not applied to "equity method goodwill"
(4) Equity method goodwill is impaired
--> if a decrease in value is "other than temporary"
5. Impairment of equity method investment
If a decrease in (D) is "other than temporary"
--> recognize such a decrease
--> beyond the amount normally recognized by equity method, i.e., current losses
(D) the value of investor's equity method investment
|