Principlesofaccounting.com globe chapter 9

Your goals for this “long-term investments” chapter are to learn about:

 

Chapter 9 covers the fundamental principles applicable to accounting for long-term investments. The specific method of accounting for a particular investment is largely governed by the intent of the investment. Investments may be acquired for their cash flow yields, to establish influence or control, and other reasons. The table presented near the beginning of the chapter summarizes the various scenarios and the applicable accounting. This table is followed by a detailed discussion of the accounting methods for the various alternatives. Be aware that entities may elect to apply a fair-value measurement option for many of their investments.

The final portion of the chapter introduces accounting for business combinations. A combination occurs when one company obtains a controlling ownership interest over another. The financial statements of both enterprises must be “consolidated” into a single set of financial statements. These statements frequently reflect goodwill and revised values for the subsidiary’s assets and liabilities, based on the fair value of the acquired company as of the acquisition date.