cost method

How Does the Cost Method Compare to Other Methods?

The cost method is often compared to the equity method and the fair value method:
Equity Method: Used when the investor has significant influence (typically 20-50% ownership). The investment is initially recorded at cost, but subsequently adjusted for the investor's share of the investee's profits or losses.
Fair Value Method: Used when investments are held for trading or available for sale. The investment is recorded at fair value, with changes in fair value recognized in earnings (for trading securities) or other comprehensive income (for available-for-sale securities).

Frequently asked queries:

Relevant Topics