Odomirok.19-RBC: R0 Equity and Market Method for Common Stocks

kaley642kaley642
in Odomirok.19-RBC

In the examples under Alice's 5th Day (R0 and Another Exam Problem), the examples show the equity method using:

  • min[ affiliate RBC x (ownership% of common stock) , value of common stock as recorded by reporting entity x (ownership% of common stock)]
    rather than

  • min[ affiliate RBC x (ownership% of common stock) , value of common stock as recorded by reporting entity]
    Similarly, for the preferred stock example, % ownership is also multiplied by the value of the preferred stock in the example, but not in the formula you provided. Which formulas are correct?

Comments

  • Staff - ACStaff - AC

    "Value of common stock as recorded by reporting entity" is a phrase that tries to get the meaning exact, but unfortunately makes it a little ambiguous. It is the phrase used in Odomirok. It means "reporting entity's holdings of its affiliate's common stock."

    In the examples, the affiliate's total stock value is given. So, you have to multiply it by the reporting entity's ownership %.

Sign In or Register to comment.