Determine the fundamental reasons why the Financial Accounting Standards Board (FASB) requires a company to use the equity method of accounting for investments. Next, propose two (2) theoretical problems of recognizing equity income that the opponents of the equity method would consider. Provide support for your rationale and theory with examples.
Analyze the potential impact of eliminating the retrospective application of the equity method to increases in previously held ownership interests that result in significant influence and which qualify for the use of the equity method. In the role of the chief executive officer (CEO) for a mid-sized company, propose the type of managerial incentives that could influence the company’s percentage ownership in another company. Provide support for your rationale and theory with examples.
One academic reference is required.
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