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Basic Question 2 of 10
The equity method is used when an investor can't control, but can exercise significant influence over the operating and financial policies of the investee. We presume, in the absence of evidence to the contrary, that this is so if:
B. The investor owns between 51% or more of the investee's voting shares.
C. The investor owns between 20% and 50% of the investee's voting shares.
A. The investor classifies the investment as available-for-sale or held-to-maturity.
B. The investor owns between 51% or more of the investee's voting shares.
C. The investor owns between 20% and 50% of the investee's voting shares.
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Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.