Reference no: EM132958309

Accounting for equity investments in other entities depends crucially on the level of influence the investor holds on the investee. Already learned how to account for equity investments where the investors obtain control over the investees. After learned the case where the investors can exert 'significant influence' over the investees. In the former case, the investor is required to consolidate the investee's financial statements, while in the latter the investor shall apply the 'equity method' to account for the investment.

Some commentators argue that having these very different treatments for similar investments is problematic as the distinction between control and significant influence is often unclear, which gives managers some flexbility to choose equity method to mask the underlying economic truth. However, many experts contend that different treatments are needed to reflect the extent to which the investee is integrated with the investor.

Problem 1: Identify accurate representative data. ...

Problem 2: Document and share how data is selected and cleansed. ...

Problem 3: Evaluate model for performance and select least-biased, in addition to performance.