Cost Method Investments, ASC 325

Investments in equity securities
1. If fair value is readily determinable
–> Apply ASC 320 Investments – Debt and Equity Securities
–> SFAS 115

2. If fair value is not readily determinable and
–> Less than 20% of voting rights
–> Apply ASC 325-20 Cost Method Investments

Initial measurement
Investments are measured –> at cost

Subsequent measurement
1. Dividends from an investee
–> recognized as earnings from investment

2. Dividends over the accumulated earnings of an investee
–> return of investment, not earnings from investment

A decrease in investment is recognized
–> if the decrease is “other than temporary”

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