The Equity Method of Accounting for Investments in Common Stock
1. The Accounting Principles Board expresses in this Opinion its views on the equity method of accounting for investments in common stock. This Opinion clarifies the applicability of the equity method of accounting (paragraph 6b) to investments in common stock of subsidiaries and extends the applicability of the equity method of accounting to investments in common stock of corporate joint ventures and certain other investments in common stock. The Opinion also applies to investments re-ported in parent-company financial statements when such state-ments are prepared for issuance to stockholders as the financial statements of the primary reporting entity.1 This Opinion super-sedes paragraphs 2, 3 and 4 of APB Opinion No. 10 and amends paragraphs 19, 20 and 21 of Accounting Research Bulletin No. 51 to the extent that they relate to the equity method of accounting.2
1 Accounting research studies on the broader subjects of accounting for inter-corporate investments and foreign operations are now in process and will encompass the matters on parent-company financial statements and on con-solidated financial statements covered in ARB No. 51 and in ARB No. 43, Chapter 12, as amended.
2 This Opinion amends APB Statement No. 4, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises, to the extent that it relates to the equity method of accounting.
Issued by the Accounting Principles Board of the American Institute of Certified Public Accountants
COPYRIGHT 1971 BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, INC.
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OPINIONS OF THE ACCOUNTING PRINCIPLES BOARD