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Worked example · EX:investments-fair-value-and-equity-method/linden-peak-equity-and-influence

Separate listed shares, private shares, and an influential holding

Reconcile fair value through earnings shares, a supplied measurement alternative holding, and an equity method investment with basis differences and dividends.

Updated Aug 8, 2026 Review due Nov 8, 2026
On this page
  1. Three holdings, three evidence paths
  2. Listed and private shares
  3. Equity-method carrying bridge
Worked-example setupScope and assumptions
  • All entities, holdings, evidence, dates, valuations, and amounts are fictional and supplied for instruction.
  • The listed shares are in Topic 321 scope and their $272,000 period-end fair value is supplied from a controlled market source.
  • The private shares qualify for and use a supplied measurement-alternative election; the $25,000 observable adjustment and $10,000 impairment are approved conclusions.
  • Linden Peak owns 30 percent of Harbor Analytics and a supported memorandum concludes significant influence without control.
  • The acquisition-date allocation supplies a $30,000 investor-share inventory difference consumed this period and an $80,000 equipment difference with eight equal periods.
Period
First fictional annual reporting period after acquisition
Units
US dollars and ownership fractions
Rounding
Retain full precision; display dollars to cents and percentages to one decimal where appropriate

Three holdings, three evidence paths

The listed shares have a controlled fair value. The private shares do not have a readily determinable fair value and use a supported measurement-alternative election. The Harbor holding has a supported significant-influence conclusion. Neither percentage nor spreadsheet layout may substitute for those facts.

Listed and private shares

listed fair-value gain in earnings = $272,000 − $240,000 = $32,000
listed dividend income = $6,000
listed current-period earnings effect = $38,000

private carrying amount = $180,000 + $25,000 observable adjustment
                        − $10,000 impairment = $195,000

The $25,000 and $10,000 are supplied conclusions. The schedule cannot decide that another transaction is comparable or that impairment exists.

Equity-method carrying bridge

Linden Peak's 30 percent share of $300,000 investee income is $90,000. The approved basis schedule consumes the $30,000 inventory layer and $10,000 of the equipment layer this period, leaving $50,000 equity-method income.

Bridge Amount
Acquisition cost $600,000.00
Share of investee net income 90,000.00
Less basis-difference effects (40,000.00)
Equity-method income 50,000.00
Less 30% share of dividends (30,000.00)
Add 30% share of investee OCI 3,600.00
Ending carrying amount $623,600.00

Dividends reduce the investment because investee performance has already been recognized through equity-method income. Leave influence, basis valuation, impairment, and any obligation associated with losses beyond zero in the workpaper's judgment column. The arithmetic bridge consumes approved decisions; it does not close those review items.

Reproduce · vary · inspect

Quantitative companions

Choose from 2 ways to work with this calculation.

uv · Python Trace equity-security and equity-method bridges in readable PythonDownload .py Excel workbook Open the equity investments workbookDownload .xlsx

Verified calculation · investment measurement analysis

The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.

equity method investments
1 field
Inspect data
{
  "board_seat_investment": {
    "acquisition_cost": 600000,
    "basis_differences": {
      "equipment": {
        "investor_share_amount": 80000,
        "useful_life_periods": 8
      },
      "inventory": {
        "investor_share_amount": 30000,
        "useful_life_periods": null
      }
    },
    "impairment_loss": 0,
    "investee_dividends": 100000,
    "investee_net_income": 300000,
    "investee_other_comprehensive_income": 12000,
    "ownership_fraction": 0.3
  }
}
fair value equity securities
1 field
Inspect data
{
  "listed_shares": {
    "acquisition_cost": 240000,
    "dividends_received": 6000,
    "reporting_fair_value": 272000
  }
}
measurement alternative equity securities
1 field
Inspect data
{
  "private_shares": {
    "acquisition_cost": 180000,
    "cumulative_impairment": 10000,
    "cumulative_observable_price_adjustment": 25000
  }
}

Recomputed result

Values recomputed by the curriculum loader
MeasureValue
board seat investment basis difference amortization40,000
board seat investment dividend reduction30,000
board seat investment ending carrying amount623,600
board seat investment equity method income50,000
board seat investment share of net income90,000
board seat investment share of oci3,600
listed shares dividend income6,000
listed shares reported amount272,000
listed shares total current period earnings38,000
listed shares unrealized gain or loss earnings32,000
private shares impairment loss earnings10,000
private shares observable price adjustment earnings25,000
private shares reported amount195,000