mergers & Acquisitions 1. what do we mean by passive investment? What are the impacts of passive...

90.2K

Verified Solution

Question

Finance

mergers & Acquisitions
1. what do we mean by passive investment? What are the impacts ofpassive investments on the balance sheet and the incomestatement?
2. Accounting for inter-corporate investment under the equitymethod, and the Equity method impact on the ROE.
3. the basic rules for consolidation, accounting fornon-controlling interests (minority interests).
4. difference between fair value hedge vs. cash flow hedge andimpact of each hedge on the income statement.
5. Accounting equity carve-out: sell-off, spin-off, andsplit-off.

itsa multi part question its all under the same part they are alltogether

Answer & Explanation Solved by verified expert

3.9 Ratings (405 Votes)

1Passive investment income refers to an investment income that does not require gross receipts from royalties rental income dividends interests and gains from the sale or exchange of securities Any interest or rental income from ventures is excluded from the definition of passive investments because they are received from actively and regularly engaged business operations The following are some examples of passive investment income Earnings from a business that does not require direct involvement from the owner or merchant Rent from property Royalties from publishing a book or from licensing a patent or other form of intellectual property and Earnings from internet advertisements on websites 2Under the equity method the investor begins as a baseline with the cost of its original investment in the investee and then in subsequent periods recognizes its share of the profits or losses of the investee both as adjustments to its original investment as noted on its balance sheet and also in the investors income statement The share of the investees profits that the investor recognizes is calculated based on the investors ownership percentage of the investees common stock When calculating See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

mergers & Acquisitions1. what do we mean by passive investment? What are the impacts ofpassive investments on the balance sheet and the incomestatement?2. Accounting for inter-corporate investment under the equitymethod, and the Equity method impact on the ROE.3. the basic rules for consolidation, accounting fornon-controlling interests (minority interests).4. difference between fair value hedge vs. cash flow hedge andimpact of each hedge on the income statement.5. Accounting equity carve-out: sell-off, spin-off, andsplit-off.itsa multi part question its all under the same part they are alltogether