Page 29 - FINAL CFA II SLIDES JUNE 2019 DAY 5.2
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LOS 14.c: Analyze how different methods used to
account for intercorporate investments affect READING 14: INTERCORPORATE INVESTMENTS
financial statements and ratios.
Equity Method, Proportionate Consolidation Method and Acquisition Method
1. All three methods report the same net income.
2. Equity method and proportionate consolidation report the same equity. Acquisition method equity will be higher by the
amount of minority interest.
3. Assets and liabilities are highest under the acquisition method and lowest under the equity method; proportionate
consolidation is in-between.
4. Revenues and expenses are highest under the acquisition method and lowest under the equity method; proportionate
consolidation is in-between.
