2 questions on investments please

CFA Level II
#1

For equity method, the carrying value goes up by amount of net income and declines by dividends

For available-for sale securities, change in mkt value is in OCI but do you reduce carrying value due to dividends? Or is interest and dividends reflected in income statement?

#2

I think AFS div + interest in net income. But trying to be sure that changes in value are only in OCI to balance the Balance sheet

the only securities that change in value from dividends is equity method investments

is that right?

#3

[original post removed]

#4

I would think no, because you do not include net income amount from your investment.

#5

Available for sale is a stock… It doesn’t have direct relationship with NI of the other firm. It has to do with market value of the stock. Stock goes up unrealized gain goes up. Dividend will be added to ur firms NI

#6

but as soon as it is deemed you have significant influence, you use equity method and thus the firm’s income and dividend will change you investment carrying amount.

interest hits your P&L

#7

But that has nothing to do with available for sale. It’s cant be both equity and available for sale. So I don’t get the response.

#8

I think Andy has a point, if you accumulate large enough position that you are able have significant influence then you have to use equity method. IMO

Gud Luk!!

#9

i think significant influence has more to do with board representation and the like. there is specific mention in the text that a large position alone (above 20%) does not represent significant influence in itself