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      Question

      Under the equity method of accounting for associates (AS 23), the investment is initially recorded at cost and subsequently adjusted for:

      A Dividends received only. Correct Answer Incorrect Answer
      B The investor's share of the post-acquisition profits or losses of the investee. Correct Answer Incorrect Answer
      C The fair value changes of the investee's shares. Correct Answer Incorrect Answer
      D The depreciation on the assets of the investee. Correct Answer Incorrect Answer
      E The goodwill arising on consolidation. Correct Answer Incorrect Answer

      Solution

      Under the equity method, the investment is carrying value is increased or decreased to recognize the investor's share of the profits or losses of the investee after the date of acquisition.

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