Comparing Equity method to Consolidation (acquisition method), is Equity the same between those two, assuming its shares purchase are less than 100%? Schweser flat out tells you they are the same, but doing EOC #3 (Reading 21), CFAI tells you equity is higher under consolidation (looks like CFAI includes minority(non-controlling) interest into the equity equation, am i getting this right?
Use the search function. Net Income is the same in the two methods. Equity is higher in Acquisition method.
Equity only higher if there is a Non Controlling interest since you need to add it to the equity. If 100% they are the same and ROE will be the same for all 3 methods. If EOC question covers that, I’m betting you’ll need to know that on the real exam and not just assume they are all the same.
Schweser is wrong on this one for sure. I have not checked their errata though. Equity under Equity method and Acquisition method will NOT be same, unless it is a 100% acquisition. Edit: Previously NCI was reported under mezzanine section and not under Equity. So, Equity was same then. Schweser needs to update its text for this accounting change.
thx for the confirmation, took my an hour to reason it out in my head yea Schweser even shows you a chart stating ROE is same across 3 methods