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divyagovil1
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Joined: 30 Jan 2009
Location: India
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Posts: 1456

Posted: 05 Apr 2009 at 11:34 \| IP Logged

Probably, I am asking a simple question, but please let me know your inputs:-

The cost method is used for investments of up to 20%.

Equity method is used for typically 20%-50% (deemed to exercise significant influence)

Assume, ownership of 20%. In that scenario, which method would be used?

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Divya - CO State

Passed using Becker Review :
FAR - 04/11/09 - 94
BEC - 05/30/09 - 86
REG - 08/29/09 - 95
AUD - 11/21/09 - 92
Ethics - 2011

rchxenson
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Joined: 22 Feb 2009
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Posts: 151

Posted: 05 Apr 2009 at 12:08 \| IP Logged

equity, unless the problem states that they do not have significant influence

Also, I think the cost is only through 19%, not 20%. So with 19.9 it would still be cost.

cpa2bsoon
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Joined: 25 Mar 2009
Location: United States
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Posts: 263

Posted: 05 Apr 2009 at 12:18 \| IP Logged

Yes 20 % and more is Equity unless stated no significant influence(then Cost). It will clearly be stated in the problem.

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Michelle/New Hampshire
BEC-80
REG-85
FAR-80
AUD-78

divyagovil1
Major Contributor

Joined: 30 Jan 2009
Location: India
Online Status: Offline
Posts: 1456

Posted: 05 Apr 2009 at 12:45 \| IP Logged

Thanks, rchxenson and cpa2bsoon :) it's 6 days to the exam and i don't need any more confusions !

Thanks once again !

__________________
Divya - CO State

Passed using Becker Review :
FAR - 04/11/09 - 94
BEC - 05/30/09 - 86
REG - 08/29/09 - 95
AUD - 11/21/09 - 92
Ethics - 2011

sanju06
Regular
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Joined: 23 Sep 2008
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Posts: 181

Posted: 05 Apr 2009 at 18:22 \| IP Logged

Becker says 0-19% , use cost method (unless problems states significant influence exists-in which case equity method will be used)

20-50% Equity method is used . It is presumed to be able to exercise significant influence within this range.

Anyway, as pointed out earlier in this discussion, margins are not usually tested.

Wish u good luck!

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