Significant influence - Which of the following is incorrect?
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Which of the following statements is incorrect?
A) The equity method represents a departure from historical cost.
B) The concept of significant influence relates to the financing and
operating policies of an investee.
C) If Company A exercises significant influence over Company B,
consolidated financial statements normally are required.
D) The equity method represents a departure from the realization
concept.
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Solution Summary
The cited solution offers an explanation for each of the four points, and determines why each is true or not.
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A is true because the act of recording income earned under the equity method increases the value of the asset above historical cost.
B is true but the influence would extend to more of the subsidiary's business such as hiring policies, cash planning, dividend payments, and more.
C is true because it usually makes more ...
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