Under this method, the classification of distributions from investees in the statement of cash flows is based upon an evaluation of the specific facts and circumstances of each distribution to determine the nature of the activity or activities of the investee that generated the distribution as either a return on investment or a return of investment.
Cash = 2,000,000 Let’s assume that the PUTRA Corporation declares a property dividend, payable in bonds of Lie Dharma Company being held to maturity and costing 0,000. Investments in Lie Dharma Company Bonds = 600,000 Firms may find themselves with sufficient retained earnings to declare a dividend but not enough liquidity for distribution.Remember, an equity method investee is one which the reporting entity has “significant influence” over through its equity ownership. exports vintage American cars to independent dealerships in Europe.It does, however, have a 25% ownership (500,000) share in one of those dealerships, Highwayman Motors.He blogs about accounting, finance and tax, during his spare time, and helps accounting students (around the globe) to understand the subject matter easier , faster.An equity security is an investment in stock issued by another company.
If you are an auditor or if you prepare financial statements, let me start by asking you a few questions. Yet, it is often the statement that receives the most attention from investors and analysts.