Company A has an investment in Company B, which it accounts for using the equity

Question

Company A has an investment in Company B, which it accounts for using the equity method. In 2016, Company A sold some of its stock in Company B, and properly begins accounting for its investment using the fair value method. Which of the following statements is correct regarding how Company A will account for this change? Company A must retroactively restate any prior year financial statements it presents, as if it had used the fair value method in those prior years. Company A has does NOT retroactively restate prior year financial statements Company has the option to either retroactively restate prior year statements, or not to. a. c. 6. Which of the following characteristics is not indicative of an enterprise qualifying as a primary beneficiary with a controlling financial interest in a variable interest entity? The power to direct the most significant economic performance activities. The power through voting or similar rights to direct activities, which significantly impact economic performance. a. b. c. The obligation to absorb potentially significant losses of the entity d. No ability to make decisions about the entity's activities. e. The right to receive potentially significant benefits of the entity nna -c.tl as Camnanv R on Ianuary 1. 2016. As of

Explanation / Answer

QUESTION 5:

ANSWER: B. COMPANY A HAS DOES NOT RETROACTIVELY RESTATE PRIOR YEAR FINANCIAL STATEMENT.

IF THERE IS NO SIGNIFICANT INFLUENCE, THEN FAIR VALUE METHOD SHALL BE USED AND FOR THAT PURPOSE, PROSPECTIVE CHANGE IN ACCOUNTING POLICIES SHALL BE MADE.

QUESTION:6

ANSWER: D. NO ABILITY TO MAKE DECISIONS ABOUT THE ENTITY'S ACTIVITY.

CONTROLING ENTITY HAVE ABILITY TO CONTROL THE ACTIVITY AND MAKE THE DECISIONS REGARDING THAT. IF THERE IS NO ABILITY, THEN IT IS NOT CONTROLING ABILITY. THEREFORE NO ABILITY TO MAKE DECISIONS ABOUT ENTITY'S ACTIVITY DOES NOT INDICATE THE CONTROLLING FINANCIAL INTEREST

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