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How is fair value relevant in evaluating a decline in the value of an equity method...

How is fair value relevant in evaluating a decline in the value of an equity method investment? Such a decline might also be indicated for example by a series of operating losses sustained by the investee. (Back up opinion with FASB ASC Topic)

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Answer #1

Equity method is the process of treating investment in associate companies.Equity accounting is usually applied where an investor entity holds 20-50% of the voting stock of the company.The investor record such investment as an asset in Balance sheet.

When net income increases the investment and proportional payment of dividend decreases.In the investor's income statement the proportional share of the investor's net income or net loss is reported as a single line item.

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