shareholders equity be the same in Equity method and acquisition method ???
Hi Kirtika,
Net Income will be the same under both methods.
Shareholders’ Equity will be higher under the acquisition method because you are consolidating the target firm’s equity with your equity. In contrast, with the equity method, you are doing no consolidation.
Thanks Graemo
I don’t think this is quite right since you ignore shareholders’ equity accounts of the target firm under the acquisition method.
The impact to equity under acquisition method will depend on whether goodwill is present and how the acquisition is paid for.