Equity method & Fair value (inv.in associates)
Quick question, assuming US GAAP, if you decide to record inv in associates under the fair value method instead of equity method, what would happen to the amount recorded if your investment (lets assume is on a publicly traded company) had a drop in the market value ? Would the unrealized loss have to be recognize on the I/S or through OCI ? Is this remotely related to an impairment ?
On a similar note, if the inv. was recorded using the equity method what would be the solution if the above happened ? Should we ignore FV since investment was recorded at cost until the FV is lower than the carrying value in our books (impairment)?
I was revising this topic and I suddenly froze with some of this questions, would really appreciate some help,
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