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APA
Subject:
Accounting, Finance, SPSS
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Coursework
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English (U.S.)
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Topic:

How Financial Statement Detect Manipulation from Equity Method?

Coursework Instructions:

Refer to Question 10 in Chapter 17 of the textbook: How is the use of the equity method subject to manipulation? How might a financial statement reader detect such behavior? In addition, provide an example to prove how the equity method may result in manipulation of the financial results.
Participate in follow-up discussion by providing recommendations to classmates' fact patterns on how a company could implement procedures to prevent manipulation of the use of the equity method' Here is question 10. How is use of the equity method subject to manipulation? How might a financial statement reader detect such behavior. Cite and reference needed, just answer the best you can because I know its short ntice

Coursework Sample Content Preview:

Analyzing Long-Term Assets for Decision Making
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How Financial Statement Detect Manipulation from Equity Method?
The equity method of accounting is when the investor company reports the revenue earned by its associate firms on its income statement by stating the amount proportional to the percentage of its equity investment in the other entity. This approach is applied in cases where the investor company is not majority-owned or controlled. The method is subject to manipulation since the investor’s financial information is not fully consolidated into the financial statement (Young, Cohen, & Bens, 2019). Since the investor company can influence the declaration of dividends, it can manipulate its income by controlling the decision of the investee to either declare or not declare dividends.
The financial statement reader can detect such behavior by considering three factors: firm value, corporate governance, and external auditor. Firm value refer...
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