On January 1, 2018, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the investment. On January 1, 2019, Jordan sold two-thirds of its investment in Nico. It no longer had the ability to exercise significant influence over the operations of Nico. How should Jordan account for this change

Question

Lyric Gonzalez

Business

31 May, 23:04

On January 1, 2018, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the investment. On January 1, 2019, Jordan sold two-thirds of its investment in Nico. It no longer had the ability to exercise significant influence over the operations of Nico. How should Jordan account for this change

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Johanna Castaneda · Answer 1

Use rerospective valuation and then begin to use Fair value valuation of the investment account from 2019 and beyond

Explanation:

First, it should be noted that Jordan will make use of different methods to account for change in its account.

A first method will apply to a retrospective adjustment method to make relevant changes in the investment account

The second step is to now use the fair-value method for his account from 2019 and beyond.

The idea of using a retrospective method is to engage or apply a new accounting pricnciple as though it has always been applied, using the retrospective method will assist Jordan to compare teh year 2018 where it had significant influence over the opeations of Nico to 2019 and future years when it begins to use the fair-value method of investment valuation.