ACTG 2011 Chapter Notes - Chapter 11: Financial Statement, Equity Method, Retained Earnings

• School: York University
• Department: Accounting
• Course: ACTG 2011
• Professor: Alla Volodina

Document Summary

Invest to earn return sometime in the future. Strategic investment: purchase competing company to reduce competition and expand presence in the market, purchase suppliers to ensure availability of inputs, purchase customers to provide market for their products, diversify. Investor corporation a corporation that invests in another corporation. Investee corporation a corporation in which an investor corporation has invested in. Control the investor can make all the important decisions for the subsidiary. The f/s of both corporations are consolidated into a single set. Significant influence does(cid:374)"t (cid:272)o(cid:374)t(cid:396)ol the i(cid:374)vestee, (cid:271)ut (cid:272)a(cid:374) i(cid:374)flue(cid:374)(cid:272)e the important decisions use the equity method of accounting. Passive investment no influence over the decision making of the investee investment is accounted for at cost or fv. The investor is able to make the important decisions in the investee and determine its strategic operating, financing, and investing policies on an ongoing basis without the support of the other shareholders.