Consolidated Financial Statements F09-22b

If using the cost method, what actions must the parent entity conduct?

The parent does not adjust on its books the carrying value of its investment in the subsidiary to reflect:

• The parent’s share of the subsidiary’s income or loss
• The parent’s share of dividends declared by the subsidiary
• The ‘depreciation’ of any difference between the fair value of the subsidiary’s identifiable net assets and the book value of the subsidiary’s identifiable net assets

The parents does recognize its share of dividends declared by the subsidiary as dividend income.