Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence over Larker. Recently, Hawkins acquired an additional 30 percent of Larker and now will use the equity method. How will the investor report change? A cumulative effect of an accounting change is shown in the current income statement. A retrospective adjustment is made to restate all prior years presented using the equity method. No change is recorded; the equity method is used from the date of the new acquisition. Hawkins will report the change as a component of accumulated other comprehensive income.
Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence over Larker. Recently, Hawkins acquired an additional 30 percent of Larker and now will use the equity method. How will the investor report change? A cumulative effect of an accounting change is shown in the current income statement. A retrospective adjustment is made to restate all prior years presented using the equity method. No change is recorded; the equity method is used from the date of the new acquisition. Hawkins will report the change as a component of accumulated other comprehensive income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence over Larker. Recently, Hawkins acquired an additional 30 percent of Larker and now will use the equity method. How will the investor report change?
- A cumulative effect of an accounting change is shown in the current income statement.
- A retrospective adjustment is made to restate all prior years presented using the equity method.
- No change is recorded; the equity method is used from the date of the new acquisition.
- Hawkins will report the change as a component of accumulated other comprehensive income.
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