Replies to post #62669 on Bots Inc (BTZI)

[lesgetrich]

They get to claim 47% of VTCQ's earnings. About $9 million showed up on the last Balance sheet as "Investment in VitaCig".

[Perfectson]

Dan this is easily googled or you ccould have asked any accounting professional instead of trying to be snarky with others. Les doesn't understand this so I understand why there's confusion.

The initial 9K is for the 1st recording of the investment in affiliates. Since it was the initial one it didn't need to book another entry for the profit or loss of vitacig. Now going forward, that entry will be affected by profit or loss of vitacig, which will be reflected in the P&L of MCIG at 47% as a profit/loss in investment in affiliated subsidiary - which also hits the balance sheets.

See the resources below, which i found in 2 minutes and it has nothing to do with dividends (although dividends would increase the gain/loss received by the investor).



http://www.accountingtools.com/equity-method

quity Method Example

ABC International acquires a 30% interest in Blue Widgets Corporation. In the most recent reporting period, Blue Widgets recognizes $1,000,000 of net income. Under the requirements of the equity method, ABC records $300,000 of this net income amount as earnings on its investment (as reported on the ABC income statement), which also increases the amount of its investment (as reported on the ABC balance sheet).

After initial measurement, the carrying amount of an equity method investment is increased to reflect
the investor’s share of income of the investee and is reduced to reflect the investor’s share of losses of
the investee and/or dividends received from the investee. The investor’s share of earnings or losses
should be based on the shares of common stock and in-substance common stock held by the investor,
and should be adjusted for the effects of basis differences. If the investee has outstanding cumulative
preferred stock, the investor should compute its share of earnings or losses after deducting the
investee’s preferred dividends, regardless of whether such dividends are declared, as discussed in
Section 5.2, Earnings or losses of an investee.
Subsequent changes to basis differences will result in adjustments to the investor’s share of income or
losses of the investee, as discussed in Section 5.2.2, Effect of basis differences on equity method earnings.

file:///C:/Users/kawa/Downloads/financialreportingdevelopments_bb2634_equitymethodinvestments_18september2014.pdf