Spectacles Inc. is a public company that operates numerous optometry and eyewear practices. It actively seeks out strategic investments to grow the company.

Spectacles Inc. recently purchased 18% of the outstanding shares of SFP Inc., a company that makes contact lenses. The other 82% shares are held by 10 shareholders with no one shareholder holding more than 12% shares. After the purchase, Spectacles Inc. and SFP Inc. signed a contract whereby SFP Inc. will be the sole provider of contact lenses to Spectacles Inc. for the next two years. The contract also assures that two members of Spectacles Inc.s board of directors will sit on SFP Inc.s 12-member board of directors.

Spectacles Inc. recently purchased 7.5% of the outstanding shares of CDG Inc., a company that does research and development in ocular therapeutics. CDG Inc. is currently doing research on its first major project and it is expected that it will take several years for the company to generate revenue from its developments. Spectacles Inc. plans to hold onto this investment for the longer term with the hope that CDG Inc. will be successful in developing patented eye treatments in the future. Spectacles Inc. is not actively involved with any decision-making at CDG Inc.

Question:

Discuss how Spectacles Inc. should account for the two investments.