discusses the different accounting methods used to report inter-corporate investments in the financial statements. Consider the very different approaches to accounting for investments in which the corporate investor is considered to be a passive investor, to have significant influence, or to control operations of the investee company.  Does the percentage of ownership determine the level of influence or control that the investor company can exert over the investee company well? Are the financial statement impacts useful for decision makers? Consider the information that is reported on the balance sheet and income statement in the case of a passive investment, an equity-method investment, and a controlling investment. Consider the information that is not reported in those cases too. Consider how a relatively small change in the percentage of an investment can produce significant changes to the investor’s balance sheet and income statement. 

Accounting for goodwill is also important in this week’s readings. Consider the significance of the increase in goodwill write downs in recent years on the amount and timing of expense recognition and financial statement impact generally. Further, consider the currently conflicting stances of the FASB and IASB regarding the amortization of goodwill (one of this week’s interesting articles). There is a high likelihood that goodwill amortization will be reintroduced under U.S. GAAP in the near future. How does this relate to the current accounting treatment? What information quality challenges exist with respect to accounting for goodwill?


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