CFA Practice Question

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CFA Practice Question

Which of the following statements best describes why minority active investments are not marked-to-market?

A. The investor company consolidates minority active investments, and the investment amount is not shown on the balance sheet.
B. The investor company is generally not interested in selling the investment, and financial statement users are presumed to be less interested in the investment's fair value.
C. Minority active investments are less than 20%, and the mark-to-market procedure is not required under GAAP.
Correct Answer: B

Equity method investments are assumed to be long-term. Since the investment is not for sale, statement users are assumed not to require the investment to be valued at fair value.

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