Introduction to Accounting for Inter-corporate Investments

Eli Amir and Marco Ghitti ()
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Eli Amir: Tel Aviv University
Marco Ghitti: SKEMA Business School

Chapter Chapter 1 in Financial Analysis of Mergers and Acquisitions, 2020, pp 3-24 from Springer

Abstract: Abstract The purpose of this chapter is to introduce the accounting methods used in transactions where one company invests in the debt and equity securities of another company. We focus our attention on investments in the voting shares of another company. In particular, we present the accounting method used to account for passive investments without significant influence over the investee (Cost or Fair Value), investments where the investor has significant influence over the investee (Equity method), and investments where the investor controls the investee (Purchase method). We also discuss the measurement of goodwill and non-controlling interests. Finally, we introduce two additional methods for inter-corporate investments: the Pooling of Interests method and Proportionate Consolidation; which are less frequently applied in practice.

Keywords: Inter-corporate investments; Purchase methods; Equity method; Significant influence; Pooling; Consolidations (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-61769-1_1

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DOI: 10.1007/978-3-030-61769-1_1

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