intercorporate investment number, investment, account

AnalystAlan

I know that if you have a subsidiary that has negative income (or losses) and you are using the equity method you don't have to report a loss in the income statement.... is it the same with consolidation and proportionate????

what happens with the investment account with a negative number??? does it stay the same or do we also have to reduce it..???

Thanks for the help....

mengxu

JCM Wrote:
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> I know that if you have a subsidiary that has
> negative income (or losses) and you are using the
> equity method you don't have to report a loss in
> the income statement....

Not correct

profil

can you help me then please?

hassan

With the equity method, losses flow through to the income statement until the balance sheet account reaches zero. Thereafter, you cease using the equity method (don't ask me what happens next -- I don't think you need to know).

When dealing with a consolidation (full or proportionate), there is no limitation in the amount of losses that flow through. Remember, this is a consolidation, and the subsidiary's assets and liabilities no matter the amounts, are combined into the parent.



JCM Wrote:
-------------------------------------------------------
> I know that if you have a subsidiary that has
> negative income (or losses) and you are using the
> equity method you don't have to report a loss in
> the income statement.... is it the same with
> consolidation and proportionate????
>
> what happens with the investment account with a
> negative number??? does it stay the same or do we
> also have to reduce it..???
>
> Thanks for the help....

- Robert

mp3bu

ok got it so just to confirm you will recognize a loss in the income statement until the investment value gets to zero... after that you don't do anything.... with the other methods you just recognize the loss every year....??