Intercorporate Investments Procedures in Equity Method Accounting Intercompany profits and losses are eliminated until realized by the investor or investee Difference between the cost of an investment and the amount of equity in net assets of an investee is accounted for as if the investee is a consolidated subsidiary-amortization of any goodwill is required Y Investment(s) in common stock is shown in the balance sheet of an investor as a single amount, and the investor's share of earnings or losses of an investee(s) is ordinarily shown in the income statement as a single amount except for any extraordinary items and prior period adjustments that are separately classified in the investor's income statement v Capital transactions of an investee affecting the investor's share in the equity of the investee are accounted for as if the investee is a consolidated subsidiary Selling stock of an investee by an investor is accounted for as a gain or loss equal to the difference between the stock's selling price and carrying amount when sold the investor should record its share of the earnings or losses of an investee from the most recen ethod v If an investee's financial statements are not sufficiently timely for an investor to apply the equity m financial statements v Loss in value of an investment that is other than a temporary decline is recognized the same as a loss in value of other long term assets v An investor should discontinue equity method accounting when the investment(and net advances) is reduced to zero, and should not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to providing further financial support to the investee; if the investee subsequently reports net income, the investor should resume equity method accounting only after its share of that net income equals the share of net losses not recognized during the period it suspended the equity method v When an investee has outstanding cumulative preferred stock, an investor computes its share of earnings (losses) after deducting the investee's preferred dividends, whether or not such dividends are declared v Carrying amount of an investment in common stock of an investee that qualifies for equity method accounting can differ from the equity in net assets of the investee-this difference affects determination of the investor's share of earnings or losses of an investee as if the investee is a consolidated sidiary; if the investor is unable to link this difference to specific accounts of the investee, the difference is considered goodwill and amortized✓ Intercompany profits and losses are eliminated until realized by the investor or investee ✓ Difference between the cost of an investment and the amount of equity in net assets of an investee is accounted for as if the investee is a consolidated subsidiary—amortization of any goodwill is required ✓ Investment(s) in common stock is shown in the balance sheet of an investor as a single amount, and the investor’s share of earnings or losses of an investee(s) is ordinarily shown in the income statement as a single amount except for any extraordinary items and prior period adjustments that are separately classified in the investor’s income statement ✓ Capital transactions of an investee affecting the investor’s share in the equity of the investee are accounted for as if the investee is a consolidated subsidiary ✓ Selling stock of an investee by an investor is accounted for as a gain or loss equal to the difference between the stock’s selling price and carrying amount when sold ✓ If an investee’s financial statements are not sufficiently timely for an investor to apply the equity method, the investor should record its share of the earnings or losses of an investee from the most recent financial statements ✓ Loss in value of an investment that is other than a temporary decline is recognized the same as a loss in value of other long term assets ✓ An investor should discontinue equity method accounting when the investment (and net advances) is reduced to zero, and should not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to providing further financial support to the investee; if the investee subsequently reports net income, the investor should resume equity method accounting only after its share of that net income equals the share of net losses not recognized during the period it suspended the equity method ✓ When an investee has outstanding cumulative preferred stock, an investor computes its share of earnings (losses) after deducting the investee’s preferred dividends, whether or not such dividends are declared ✓ Carrying amount of an investment in common stock of an investee that qualifies for equity method accounting can differ from the equity in net assets of the investee—this difference affects determination of the investor’s share of earnings or losses of an investee as if the investee is a consolidated subsidiary; if the investor is unable to link this difference to specific accounts of the investee, the difference is considered goodwill and amortized Intercorporate Investments Procedures in Equity Method Accounting