Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles

CHAPTER 15

INVESTMENTS—EQUITY METHOD AND JOINT VENTURES

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

The Equity Method of Accounting for Investments

Introduction and background

Initial measurement

Differences in fiscal year

Accounting for a differential between cost of an equity method investment and the investor’s proportionate share of net assets

Investor share of investee losses in excess of the carrying value of the investment

Accounting for subsequent investments in an investee after suspension of equity method loss recognition

Intercompany transactions between investor and investee

Investee income items separately reportable by the investor

Obtaining significant influence subsequent to initial investment

Accounting for a partial sale or additional purchase of an equity method investment

Investor accounting for investee capital transactions

Investor’s proportionate share of other comprehensive income items

Exchanges of equity method investments

Change in level of ownership or degree of influence

Significant influence in the absence of ownership of voting common stock

Equity Investments in Corporate Joint Ventures and Noncorporate Entities

Corporate joint ventures

General partnerships

Limited partnerships

Limited liability companies that maintain a specific ownership account for each investor

Limited liability companies that are functionally equivalent to corporations (“analogous entities”)

Display in the reporting entity’s financial statements ...