Differences Between the Cost and Equity Method ● The choice of the cost or equity method has no effect on the consolidated financial statements. ● Under the cost method, in the year of the combination no entries are made on the parent’s books to write off the portions of the differential that expire during that year. ● Consolidation differences become more evident in the second year of ownership. ● Under the cost method, the investment elimination entry continues to be the same in each subsequent year unless there is a change in ownership level or a change in the number of subsidiary shares outstanding.
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