Why would Net Income be the same for the parent company under the equity and acquisition methods? As I understand, in the equity method the parent company adds a percentage of the subsidiary’s net income, while in the acquisition method the parent adds all revenues - cost. What is wrong in my understanding? Thanks in advance
Under the acquisition method the parent also recognizes the minority interest in the subsidiary’s net income. That’s the difference between the subsidiary’s total net income and the parent’s share of the subsidiary’s net income, so the results are the same: the parent recognizes only its share. Two steps instead of one.
Thank you S2000magician! I couldn’t wrap my head around it!