CFAI FRA Reading 14 - EOC #30

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Can someone explain why 320 is subtracted? Thank you!

First, I see that you’re using the 2018 curriculum, not the 2019 curriculum.

Second, they don’t subtract 310; they subtract 320.

The reason is that the 320 represents the investment in Boswell under the equity method. To convert from the equity method to the consolidation method, you have to remove the equity method numbers, then add in the consolidation numbers.

So I guess the piece I am missing is the conversion from the equity method to the consolidation method? The question/vignette does not specify that NinMount intitally used the equity method. Still confused here, but I appreciate the quick response.

Yes it does: it shows an account called “Investment in Boswell” on its balance sheet. Such an account arises _ only _ when a company is using the equity method.

Ahh and there is the crux! Thank you!

My pleasure.