FRA - Intercorporate Investments

CFA Level II FRA
#1

EoC. Q.12

“Net income will most likely be independent of the accounting method used for investment…”

With Equity method, it would be 50% NI of investment

With consolidation, apart from 50% NI , there will also be minority share of NI in Income statement.

How can then NI be same under both methods?

#2

equity NI = NI of mother + % share of NI investee

acquisition NI = NI mother + total NI of subsidiary - NI of minority

hence equal.

#3

Oh I thought we add minority stake. Thanks!