,ACCESS Test Bank for Fundamentals of Advanced Accounting 9th Edition Hoyle
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9/e
CHAPTER 1 o o
THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS
o o o o o o
ChapteroOutline
I. Fouromethodsoareoprincipallyousedotooaccountoforoanoinvestmentoinoequityosecuritiesoalongo
withoaofairovalueooption.
A. Fairovalueomethod:oappliedobyoanoinvestorowhenoonlyoaosmallopercentageoofoao
company’sovotingostockoisoheld.
1. Theoinvestororecognizesoincomeowhenotheoinvesteeodeclaresoaodividend.
2. Portfoliosoareoreportedoatofairovalue.oIfofairovaluesoareounavailable,oinvestmentoiso
reportedoatocost.
B. CostoMethod:oappliedotooinvestmentsowithoutoaoreadilyodeterminableofairovalue.oWhenot
heofairovalueoofoanoinvestmentoinoequityosecuritiesoisonotoreadilyodeterminable,oandotheoi
nvestmentoprovidesoneitherosignificantoinfluenceonorocontrol,otheoinvestmentomayobeom
easuredoatocost.oTheoinvestmentoremainsoatocostounless
1. Aodemonstrableoimpairmentooccursoforotheoinvestment,oor
2. Anoobservableopriceochangeooccursoforoidenticaloorosimilaroinvestmentsoofotheosameoi
ssuer.
Theoinvestorotypicallyorecognizesoitsoshareoofoinvesteeodividendsodeclaredoasodividendoin
come.
C. Consolidation:owhenooneofirmocontrolsoanothero(e.g.,owhenoaoparentohasoaomajorityoin
terestoinotheovotingostockoofoaosubsidiaryoorocontrolothroughovariableointerests,otheirofin
ancialostatementsoareoconsolidatedoandoreportedoforotheocombinedoentity.
D. Equityomethod:oappliedowhenotheoinvestorohasotheoabilityotooexerciseosignificanto
influenceooverooperatingoandofinancialopoliciesoofotheoinvestee.
1. Abilityotoosignificantlyoinfluenceoinvesteeoisoindicatedobyoseveralofactorsoincludingo
representationoonotheoboardoofodirectors,oparticipationoinopolicy-making,oetc.
2. GAAPoguidelinesopresumeotheoequityomethodoisoapplicableoifo20otoo50opercentoofotheo
outstandingovotingostockoofotheoinvesteeoisoheldobyotheoinvestor.
Currentofinancialoreportingostandardsoallowofirmsotooelectotoouseofairovalueoforoanyonewoinves
tmentoinoequityosharesoincludingothoseowhereotheoequityomethodowouldootherwiseoapply.oHo
wever,otheooption,oonceotaken,oisoirrevocable.oTheoinvestororecognizesobothoinvesteeodivide
ndsoandochangesoinofairovalueooverotimeoasoincome.
1-1
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
,ACCESS Test Bank for Fundamentals of Advanced Accounting 9th Edition Hoyle
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9e
II. Accountingoforoanoinvestment:otheoequityomethod
A. Theoinvestoroadjustsotheoinvestmentoaccountotooreflectoallochangesoinotheoequityoofotheoi
nvesteeocompany.
B. Theoinvestoroaccruesoinvesteeoincomeowhenoitoisoreportedoinotheoinvestee’sofinancialo
statements.
C. DividendsodeclaredobyotheoinvesteeocreateoaoreductionoinotheocarryingoamountoofotheoIn
vestmentoaccount.oThisobookoassumesoalloinvesteeodividendsoareodeclaredoandopaidoino
theosameoreportingoperiod.
III. Specialoaccountingoproceduresousedoinotheoapplicationoofotheoequityomethod
A. Reportingoaochangeotootheoequityomethodowhenotheoabilityotoosignificantlyoinfluenceoanoi
nvesteeoisoachievedothroughoaoseriesoofoacquisitions.
1. Initialopurchase(s)owillobeoaccountedoforobyomeansoofotheofairovalueomethodo(oroato
cost)ountilotheoabilityotoosignificantlyoinfluenceoisoattained.
2. Whenotheoabilityotooexerciseosignificantoinfluenceooccursofollowingoaoseriesoofostocko
purchases,otheoinvestoroappliesotheoequityomethodoprospectively.oTheototalofairovalu
eoatotheodateosignificantoinfluenceoisoattainedoisocomparedotootheoinvestee’sobookova
lueotoodetermineofutureoexcessofairovalueoamortizations.
B. Investeeoincomeofromootherothanocontinuingooperations
1. Theoinvestororecognizesoitsoshareoofoinvesteeoreportedootherocomprehensiveo
incomeo(OCI)othroughotheoinvestmentoaccountoandotheoinvestor’soownoOCI.
2. Incomeoitemsosuchoasodiscontinuedooperationsothatoareoreportedoseparatelyobyotheoi
nvesteeoshouldobeoshownoinotheosameomannerobyotheoinvestor.oTheomaterialityoofoth
eseootheroinvesteeoincomeoelementso(asoitoaffectsotheoinvestor)ocontinuesotoobeoaocri
terionoforoseparateodisclosure.
C. Investeeolosses
1. Lossesoreportedobyotheoinvesteeocreateocorrespondingolossesoforotheoinvestor.
2. Aopermanentodeclineoinotheofairovalueoofoanoinvestee’sostockoshouldobeorecognizedoi
mmediatelyobyotheoinvestoroasoanoimpairmentoloss.
3. Investeeolossesocanopossiblyoreduceotheocarryingovalueoofotheoinvestmentoaccountot
ooaozeroobalance.oAtothatopoint,otheoequityomethodoceasesotoobeoapplicableoandotheof
air-valueomethodoisosubsequentlyoused.
D. Reportingotheosaleoofoanoequityoinvestment
1. Theoinvestoroappliesotheoequityomethodountilotheodisposalodateotooestablishoaopropero
bookovalue.
2. Followingotheosale,otheoequityomethodocontinuesotoobeoappropriateoifoenoughoshareso
areostilloheldotoomaintainotheoinvestor’soabilityotoosignificantlyoinfluenceotheoinvestee.oI
fothatoabilityohasobeenolost,otheofair-valueomethodoisosubsequentlyoused.
IV. Excessoinvestmentocostooverobookovalueoacquired
A. Theopriceoanoinvestoropaysoforoequityosecuritiesooftenodiffersosignificantlyofromotheoi
nvestee’sounderlyingobookovalueoprimarilyobecauseotheohistoricalocostobasedoacco
untingomodelodoesonotokeepotrackoofochangesoinoaofirm’sofairovalue.
B. Paymentsomadeoinoexcessoofounderlyingobookovalueocanosometimesobeoidentifiedowitho
specificoinvesteeoaccountsosuchoasoinventoryooroequipment.
C. Anoextraoacquisitionopriceocanoalsoobeoassignedotooanticipatedobenefitsothatoareoexpect
edotoobeoderivedofromotheoinvestment.oInoaccounting,otheseoamountsoareopresumedotoo
reflectoanointangibleoassetoreferredotooasogoodwill.oGoodwilloisocalculated
1-2
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
, ACCESS Test Bank for Fundamentals of Advanced Accounting 9th Edition Hoyle
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9/e
asoanyoexcessopaymentothatoisonotoattributableotoospecificoidentifiableoassetsoandoliabiliti
esoofotheoinvestee.oBecauseogoodwilloisoanoindefinite-livedoasset,oitoisonotoamortized.
V. Deferraloofointra-entityogrossoprofitoinoinventory
A. Theoinvestor’soshareoofointra-
entityoprofitsoinoendingoinventoryoareonotorecognizedountilotheotransferredogoodsoareoeith
eroconsumedoorountilotheyoareoresoldotoounrelatedoparties.
B. Downstreamosalesoofoinventory
1. “Downstream”orefersotootransfersomadeobyotheoinvestorotootheoinvestee.
2. Intra-
entityogrossoprofitsofromosalesoareoinitiallyodeferredounderotheoequityomethodoandot
henorecognizedoasoincomeoatotheotimeoofotheoinventory’soeventualodisposal.
3. Theoamountoofogrossoprofitotoobeodeferredoisotheoinvestor’soownershipopercentageo
multipliedobyotheomarkupoonotheomerchandiseoremainingoatotheoendoofotheoyear.
C. Upstreamosalesoofoinventory
1. “Upstream”orefersotootransfersomadeobyotheoinvesteeotootheoinvestor.
2. Underotheoequityomethod,otheodeferraloprocessoforointra-
entityogrossoprofitsoisoidenticaloforoupstreamoandodownstreamotransfers.oTheoproce
duresoareoseparatelyoidentifiedoinoChapteroOneobecauseotheohandlingodoesovaryowit
hinotheoconsolidationoprocess.
AnswersotooDiscussionoQuestions
Theotextbookoincludesodiscussionoquestionsotoostimulateostudentothoughtoandodiscussion.oTheseoq
uestionsoareoalsoodesignedotooallowostudentsotooconsiderorelevantoissuesothatomightootherwiseobeoo
verlooked.oSomeoofotheseoquestionsomayobeoaddressedobyotheoinstructoroinoclassotoomotivateostude
ntodiscussion.oStudentsoshouldobeoencouragedotoobeginobyodefiningotheoissue(s)oinoeachocase.oNext
,oauthoritativeoaccountingoliteratureo(FASBoASC)oorootherorelevantoliteratureocanobeoconsultedoasoao
preliminaryostepoinoarrivingoatologicaloactions.oFrequently,otheoFASBoAccountingoStandardsoCodific
ationowilloprovideotheonecessaryosupport.
Unfortunately,oinoaccounting,odefinitiveoresolutionsotoofinancialoreportingoquestionsoareonotoalwaysoa
vailable.oStudentsooftenoseemotoobelieveothatoalloaccountingoissuesohaveobeenoresolvedoinotheopasto
soothatoaccountingoeducationoisoonlyoaomatteroofolearningotooapplyohistoricallyoprescribedoprocedure
s.oHowever,oinoactualopractice,otheoonlyorealoansweroisooftenotheooneothatoprovidesotheofairestorepres
entationoofotheofirm’sotransactions.oIfoanoauthoritativeosolutionoisonotoavailable,ostudentsoshouldobeod
irectedotoolistoalloofotheoissuesoinvolvedoandotheoconsequencesoofopossibleoalternativeoactions.oTheo
variousofactorsopresentedocanobeoweighedotooproduceoaoviableosolution.
Theodiscussionoquestionsoareodesignedotoohelpostudentsodeveloporesearchoandocriticalothinkingoskill
soinoaddressingoissuesothatogoobeyondotheopurelyomechanicaloelementsoofoaccounting.
DidotheoCostoMethodoInviteoManipulation?
Theocostomethodoofoaccountingoforoinvestmentsooftenocausedoaolackoofoobjectivityoinoreportedoincom
eofigures.oWithoaolargeoblockoofotheoinvestee’sovotingoshares,oanoinvestorocouldoinfluenceotheoamoun
toandotimingoofotheoinvestee’sodividendodeclarations.oThus,owhenoenjoyingoaogoodoearningsoyear,oan
oinvestoromightoinfluenceotheoinvesteeotoowithholdodeclaringoaodividendountiloneededoinoaosubsequen
toyear.oAlternatively,oifotheoinvestorojudgedothatoitsocurrentoyearoearningso“neededoaoboost,”oitomightoi
nfluenceotheoinvesteeotoodeclareoaocurrentoyearodividend.oTheoequityomethodoeffectivelyoremovesom
anagers’oabilityotooincreaseocurrentoincomeo(orodeferoincomeotoofutureoperiods)othroughotheiroinfluen
ceooverotheotimingoandoamountsoofoinvesteeodividendodeclarations.
1-3
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9/e
CHAPTER 1 o o
THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS
o o o o o o
ChapteroOutline
I. Fouromethodsoareoprincipallyousedotooaccountoforoanoinvestmentoinoequityosecuritiesoalongo
withoaofairovalueooption.
A. Fairovalueomethod:oappliedobyoanoinvestorowhenoonlyoaosmallopercentageoofoao
company’sovotingostockoisoheld.
1. Theoinvestororecognizesoincomeowhenotheoinvesteeodeclaresoaodividend.
2. Portfoliosoareoreportedoatofairovalue.oIfofairovaluesoareounavailable,oinvestmentoiso
reportedoatocost.
B. CostoMethod:oappliedotooinvestmentsowithoutoaoreadilyodeterminableofairovalue.oWhenot
heofairovalueoofoanoinvestmentoinoequityosecuritiesoisonotoreadilyodeterminable,oandotheoi
nvestmentoprovidesoneitherosignificantoinfluenceonorocontrol,otheoinvestmentomayobeom
easuredoatocost.oTheoinvestmentoremainsoatocostounless
1. Aodemonstrableoimpairmentooccursoforotheoinvestment,oor
2. Anoobservableopriceochangeooccursoforoidenticaloorosimilaroinvestmentsoofotheosameoi
ssuer.
Theoinvestorotypicallyorecognizesoitsoshareoofoinvesteeodividendsodeclaredoasodividendoin
come.
C. Consolidation:owhenooneofirmocontrolsoanothero(e.g.,owhenoaoparentohasoaomajorityoin
terestoinotheovotingostockoofoaosubsidiaryoorocontrolothroughovariableointerests,otheirofin
ancialostatementsoareoconsolidatedoandoreportedoforotheocombinedoentity.
D. Equityomethod:oappliedowhenotheoinvestorohasotheoabilityotooexerciseosignificanto
influenceooverooperatingoandofinancialopoliciesoofotheoinvestee.
1. Abilityotoosignificantlyoinfluenceoinvesteeoisoindicatedobyoseveralofactorsoincludingo
representationoonotheoboardoofodirectors,oparticipationoinopolicy-making,oetc.
2. GAAPoguidelinesopresumeotheoequityomethodoisoapplicableoifo20otoo50opercentoofotheo
outstandingovotingostockoofotheoinvesteeoisoheldobyotheoinvestor.
Currentofinancialoreportingostandardsoallowofirmsotooelectotoouseofairovalueoforoanyonewoinves
tmentoinoequityosharesoincludingothoseowhereotheoequityomethodowouldootherwiseoapply.oHo
wever,otheooption,oonceotaken,oisoirrevocable.oTheoinvestororecognizesobothoinvesteeodivide
ndsoandochangesoinofairovalueooverotimeoasoincome.
1-1
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
,ACCESS Test Bank for Fundamentals of Advanced Accounting 9th Edition Hoyle
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9e
II. Accountingoforoanoinvestment:otheoequityomethod
A. Theoinvestoroadjustsotheoinvestmentoaccountotooreflectoallochangesoinotheoequityoofotheoi
nvesteeocompany.
B. Theoinvestoroaccruesoinvesteeoincomeowhenoitoisoreportedoinotheoinvestee’sofinancialo
statements.
C. DividendsodeclaredobyotheoinvesteeocreateoaoreductionoinotheocarryingoamountoofotheoIn
vestmentoaccount.oThisobookoassumesoalloinvesteeodividendsoareodeclaredoandopaidoino
theosameoreportingoperiod.
III. Specialoaccountingoproceduresousedoinotheoapplicationoofotheoequityomethod
A. Reportingoaochangeotootheoequityomethodowhenotheoabilityotoosignificantlyoinfluenceoanoi
nvesteeoisoachievedothroughoaoseriesoofoacquisitions.
1. Initialopurchase(s)owillobeoaccountedoforobyomeansoofotheofairovalueomethodo(oroato
cost)ountilotheoabilityotoosignificantlyoinfluenceoisoattained.
2. Whenotheoabilityotooexerciseosignificantoinfluenceooccursofollowingoaoseriesoofostocko
purchases,otheoinvestoroappliesotheoequityomethodoprospectively.oTheototalofairovalu
eoatotheodateosignificantoinfluenceoisoattainedoisocomparedotootheoinvestee’sobookova
lueotoodetermineofutureoexcessofairovalueoamortizations.
B. Investeeoincomeofromootherothanocontinuingooperations
1. Theoinvestororecognizesoitsoshareoofoinvesteeoreportedootherocomprehensiveo
incomeo(OCI)othroughotheoinvestmentoaccountoandotheoinvestor’soownoOCI.
2. Incomeoitemsosuchoasodiscontinuedooperationsothatoareoreportedoseparatelyobyotheoi
nvesteeoshouldobeoshownoinotheosameomannerobyotheoinvestor.oTheomaterialityoofoth
eseootheroinvesteeoincomeoelementso(asoitoaffectsotheoinvestor)ocontinuesotoobeoaocri
terionoforoseparateodisclosure.
C. Investeeolosses
1. Lossesoreportedobyotheoinvesteeocreateocorrespondingolossesoforotheoinvestor.
2. Aopermanentodeclineoinotheofairovalueoofoanoinvestee’sostockoshouldobeorecognizedoi
mmediatelyobyotheoinvestoroasoanoimpairmentoloss.
3. Investeeolossesocanopossiblyoreduceotheocarryingovalueoofotheoinvestmentoaccountot
ooaozeroobalance.oAtothatopoint,otheoequityomethodoceasesotoobeoapplicableoandotheof
air-valueomethodoisosubsequentlyoused.
D. Reportingotheosaleoofoanoequityoinvestment
1. Theoinvestoroappliesotheoequityomethodountilotheodisposalodateotooestablishoaopropero
bookovalue.
2. Followingotheosale,otheoequityomethodocontinuesotoobeoappropriateoifoenoughoshareso
areostilloheldotoomaintainotheoinvestor’soabilityotoosignificantlyoinfluenceotheoinvestee.oI
fothatoabilityohasobeenolost,otheofair-valueomethodoisosubsequentlyoused.
IV. Excessoinvestmentocostooverobookovalueoacquired
A. Theopriceoanoinvestoropaysoforoequityosecuritiesooftenodiffersosignificantlyofromotheoi
nvestee’sounderlyingobookovalueoprimarilyobecauseotheohistoricalocostobasedoacco
untingomodelodoesonotokeepotrackoofochangesoinoaofirm’sofairovalue.
B. Paymentsomadeoinoexcessoofounderlyingobookovalueocanosometimesobeoidentifiedowitho
specificoinvesteeoaccountsosuchoasoinventoryooroequipment.
C. Anoextraoacquisitionopriceocanoalsoobeoassignedotooanticipatedobenefitsothatoareoexpect
edotoobeoderivedofromotheoinvestment.oInoaccounting,otheseoamountsoareopresumedotoo
reflectoanointangibleoassetoreferredotooasogoodwill.oGoodwilloisocalculated
1-2
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
, ACCESS Test Bank for Fundamentals of Advanced Accounting 9th Edition Hoyle
o o o o o o o o o o
Chaptero01o-oTheoEquityoMethodoofoAccountingoforoInvestmentso–
oHoyle,oSchaefer,oDoupnik,oFundamentalsoofoAdvanced oAccounting,o9/e
asoanyoexcessopaymentothatoisonotoattributableotoospecificoidentifiableoassetsoandoliabiliti
esoofotheoinvestee.oBecauseogoodwilloisoanoindefinite-livedoasset,oitoisonotoamortized.
V. Deferraloofointra-entityogrossoprofitoinoinventory
A. Theoinvestor’soshareoofointra-
entityoprofitsoinoendingoinventoryoareonotorecognizedountilotheotransferredogoodsoareoeith
eroconsumedoorountilotheyoareoresoldotoounrelatedoparties.
B. Downstreamosalesoofoinventory
1. “Downstream”orefersotootransfersomadeobyotheoinvestorotootheoinvestee.
2. Intra-
entityogrossoprofitsofromosalesoareoinitiallyodeferredounderotheoequityomethodoandot
henorecognizedoasoincomeoatotheotimeoofotheoinventory’soeventualodisposal.
3. Theoamountoofogrossoprofitotoobeodeferredoisotheoinvestor’soownershipopercentageo
multipliedobyotheomarkupoonotheomerchandiseoremainingoatotheoendoofotheoyear.
C. Upstreamosalesoofoinventory
1. “Upstream”orefersotootransfersomadeobyotheoinvesteeotootheoinvestor.
2. Underotheoequityomethod,otheodeferraloprocessoforointra-
entityogrossoprofitsoisoidenticaloforoupstreamoandodownstreamotransfers.oTheoproce
duresoareoseparatelyoidentifiedoinoChapteroOneobecauseotheohandlingodoesovaryowit
hinotheoconsolidationoprocess.
AnswersotooDiscussionoQuestions
Theotextbookoincludesodiscussionoquestionsotoostimulateostudentothoughtoandodiscussion.oTheseoq
uestionsoareoalsoodesignedotooallowostudentsotooconsiderorelevantoissuesothatomightootherwiseobeoo
verlooked.oSomeoofotheseoquestionsomayobeoaddressedobyotheoinstructoroinoclassotoomotivateostude
ntodiscussion.oStudentsoshouldobeoencouragedotoobeginobyodefiningotheoissue(s)oinoeachocase.oNext
,oauthoritativeoaccountingoliteratureo(FASBoASC)oorootherorelevantoliteratureocanobeoconsultedoasoao
preliminaryostepoinoarrivingoatologicaloactions.oFrequently,otheoFASBoAccountingoStandardsoCodific
ationowilloprovideotheonecessaryosupport.
Unfortunately,oinoaccounting,odefinitiveoresolutionsotoofinancialoreportingoquestionsoareonotoalwaysoa
vailable.oStudentsooftenoseemotoobelieveothatoalloaccountingoissuesohaveobeenoresolvedoinotheopasto
soothatoaccountingoeducationoisoonlyoaomatteroofolearningotooapplyohistoricallyoprescribedoprocedure
s.oHowever,oinoactualopractice,otheoonlyorealoansweroisooftenotheooneothatoprovidesotheofairestorepres
entationoofotheofirm’sotransactions.oIfoanoauthoritativeosolutionoisonotoavailable,ostudentsoshouldobeod
irectedotoolistoalloofotheoissuesoinvolvedoandotheoconsequencesoofopossibleoalternativeoactions.oTheo
variousofactorsopresentedocanobeoweighedotooproduceoaoviableosolution.
Theodiscussionoquestionsoareodesignedotoohelpostudentsodeveloporesearchoandocriticalothinkingoskill
soinoaddressingoissuesothatogoobeyondotheopurelyomechanicaloelementsoofoaccounting.
DidotheoCostoMethodoInviteoManipulation?
Theocostomethodoofoaccountingoforoinvestmentsooftenocausedoaolackoofoobjectivityoinoreportedoincom
eofigures.oWithoaolargeoblockoofotheoinvestee’sovotingoshares,oanoinvestorocouldoinfluenceotheoamoun
toandotimingoofotheoinvestee’sodividendodeclarations.oThus,owhenoenjoyingoaogoodoearningsoyear,oan
oinvestoromightoinfluenceotheoinvesteeotoowithholdodeclaringoaodividendountiloneededoinoaosubsequen
toyear.oAlternatively,oifotheoinvestorojudgedothatoitsocurrentoyearoearningso“neededoaoboost,”oitomightoi
nfluenceotheoinvesteeotoodeclareoaocurrentoyearodividend.oTheoequityomethodoeffectivelyoremovesom
anagers’oabilityotooincreaseocurrentoincomeo(orodeferoincomeotoofutureoperiods)othroughotheiroinfluen
ceooverotheotimingoandoamountsoofoinvesteeodividendodeclarations.
1-3
©oMcGrawoHilloLLC.oAllorightsoreserved.oNooreproductionoorodistributionowithoutotheopriorowrittenoconsentoofoMcGrawoHilloLL
C.
mynursytest.store
