[JT]

Hey everyone.

I’m reviewing FAR and have been having issues understanding the equity method vs cost/fair value methods.

I reviewed my Becker material and Ninja Material and I think my problem is,…. I MISSING THE ELEPHANT IN THE ROOM!!!…

TO ME, it seems like there are different “equity methods” and “fair value methods” in each portion of the exam (NFP, Govt, consolidations, Bond valuation, etc). I think my entire understanding/foundation for FAR is messed up.

For example, with the cash method vs accrual method of income recognition, the general gist of the cash method is income is recognized when physically received and the accrual method income is recognized when accrued.

Is there a simple-overarching concept about the fair value method vs equity method that im not getting?

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Andyred04]

Depends on the % of the equity security that the entity holds. FV method is for entities holding 1-20% of an equity security's outstanding common shares, Equity method is for entities holding 21-50% of the equity security's outstanding common shares.

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[JT]

Thank you for your response.

Conceptually, is there an over-arching concept with fair value and equity, for example, when a company buys back their t-stock, they can chose the fair value method or the cost method. how is this similar to the fair value method of bonds? How is it similar to the fair value method of consolidations? etc?

Going back to the example I mentioned regarding the cash vs accrual method, regardless of what your looking at, “cash method” means recognition when physically received, and “accrual method” means recognized when accrued.

What about “cost method”? what about equity method?

Mentally, I remember things by understanding them conceptually then working out the details from there.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Author]

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