The company you work for is considering acquiring stock in another company, and the CEO does not fully understand how the acquisition will be accounted for. He needs more information on whether or not the stock being acquired will require use of the equity method of accounting for investments or require consolidation.
Prepare a memo to the CEO explaining when an investment is accounted for using the equity method and when consolidation is required. Make sure you fully cover how investments are classified and accounted for using both methods and that your post is in memo format. Use your readings from the text and at least one additional academic resource to provide support for your response. The following resources can be used along with any others that are considered authoritative on the subject.
- FASB Accounting Standards Codification Use the username and password provided to access this resource. Username: AAA52882, Password: 2F5BNjt
- American Institute of CPAs (AICPA)
- International Accounting Standards Board (IASB)