I have some doubts in Intercorp Inv, please advice… 1) In equity method, does the equity change or it remains same?I know in acquisition it changes and is highest but what abt in equity and prop consolidation… 2) How to calculate net income under either equity/prop con/acquisition?is it always…NI + % ownership (N.I of target)? 2) While calculating the portion of net income that comes from the acquisition, we take the proportionate income and add it to acquirer’s income. However, I noticed in some cases dividends are subtracted and in some they are not? Can some one please explain this… 3) Pg 70, Reading 21 Vol2, Question 17 I neither understood the question, nor the solution…please explain.
> > 1) In equity method, does the equity change or it > remains same?I know in acquisition it changes and > is highest but what abt in equity and prop > consolidation… If you raise the funds necessary to make the equity investment through issuance of new shares, your equity will be higher. If you use your readily avalible cash to make the investment, then there will no difference in equity. If you borrow for the same reason, your liabilities will increase. In other words, it depends on how you finance the investment.
1.Dividends and Interest Income are shown in the IS for all methods ( H-T-M, A-F-S and H-F-T ) of Financial Assets. 2. For significant influence or control, dividends / interest income reduce the asset balance and increase cash. Doesn’t touch the IS at all , direct adjustments to BS items