ADMS 4520 Lecture Notes - Lecture 1: Equity Method

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11 May 2018

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ADMS 4520

Summary Week 1

Intercorporate Investments – a purchase by one corporation of the securities of another

Classified as either passive or strategic.

Passive (non strategic) - investment is to earn dividends or profits by actively trading.

Choices of reporting: FVTPL or FVTOCI (irrevocable)

Strategic – investment made to be able to control or significantly influence the

operating and/or financing decisions of the investee. Generally owns directly or

indirectly 20% or more of the voting shares.

Significant Influence 20-50% - Equity method

Control >50% - consolidate

Parent Sub Co 99

Co 1 Co 5 Consol Consolidated f/s

Elim/Adj

Assets xx xx xx xx

Liab xx xx xx xx

Equity xx xx xx xx

Rev/Exp xx xx xx xx

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