If A classifies its investment in B -25% investment with significant influence- as trading securities ,would dividends and unrealized gains be included in the income statement of A ? Yes or No reference: The long FSA vignette in schweser with a conversation between Proudhomme and whatsisname
without having started my review, i would say yes because trading securities are marked to market and PnL flows through the income statement…am i right?
Doesn’t holding “significant influence,” in a security require it to be classified under the equity method, and not the market method. If it’s “without significant influence,” the answer is yes. These amounts are subtracted back out of NI in the statement of cash flows.
I’d say only recognize 25% of the other company’s net income on your income statement.
^^ correct: If the influence is significant then it doesnt matter what management decides to classify the shares as ,trading or htm or avbl for sale - the fin statements must be prepared using the equity method. so dividends and unrealized gains/losses are NOT recognized