Advanced Accy-3 methods -2

Several advanced accounting texts (1) present the full equity method in their consolidated statement working paper pedagogies. In these texts, many of the entries made by the parent company to adjust its accounts for unrealized profits on intercompany transactions would be different or would require modification if the parent issued "parent only" statements, or if the subsidiary was not consolidated.

The above paragraph is not a criticism of these textbooks, as their objectives are directed toward the preparation of consolidated financial statements. All of the equity-method approaches listed above, in addition to the cost method, are appropriate pedagogies. (2) In all of these texts, the consolidated statement working papers and resulting consolidated statements are correct in all respects, regardless of the method used by the parent company to account for its subsidiary investment. However, there appears to be a void in the literature with respect to accounting for intercompany transactions when a parent/investor uses the equity method to account for its …