Compare the equity method of accounting to the fair value method for equity securities. In what cases would you use each? How can these rules be manipulated to make an investment appear different than it is? Is that ethical?
The equity method and the fair value method differ in how the events are recorded. Equity method is applied when the holding is between 20% and 50% (there is a presumption that with this level of holding the investor company can exercise significant influence over the investee company) while fair value method is applied where the investor company has less than 20% holding and the presumption is that the investor does not have any significant influence over the investee ...
The solution compares the equity method of accounting to fair value method