Under U.S. Generally Accepted Accounting Principles (GAAP), the method an investor uses to account for its investment in an investee depends on the level of influence or control exerted.

1. Consolidation: Used when the investor has a controlling financial interest (typically >50% voting stock), combining the parent and subsidiary's financial statements.

2. Equity Basis (Method): Used when the investor has significant influence but not control (typically 20-50% ownership).

3. Market (Fair Value Method): The default method for equity investments that do not qualify for consolidation or the equity method.

4. Cost (Measurement Alternative): Permitted for equity investments that do not have a readily determinable fair value and do not qualify for other methods.

These four methods represent the primary framework for reporting investments.

A. "Renovation" is not a recognized accounting method for reporting investments.

C. "Time" is a concept used in various accounting calculations (e.g., depreciation) but is not a method for reporting investments.

D. "Performance" and "Time" are not recognized accounting methods for reporting investments.

1. Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

ASC Topic 810

Consolidation: Outlines the requirements for preparing consolidated financial statements when a parent company has a controlling financial interest in a subsidiary.

ASC Topic 323

Investments—Equity Method and Joint Ventures: Specifies the use of the equity method when an investor has the ability to exercise significant influence over an investee.

ASC Topic 321

Investments—Equity Securities: Requires equity investments to be measured at fair value ("Market") with changes recognized in net income. It also provides a measurement alternative ("Cost" method) for equity securities without a readily determinable fair value.

2. Hoyle

J. B.

Schaefer

T. F.

& Doupnik

T. S. (2021). Advanced Accounting (14th ed.). McGraw-Hill Education.

Chapter 1

"The Equity Method of Accounting for Investments": Discusses the criteria for using the equity method (pp. 2-4).

Chapter 3

"Consolidation of Financial Information": Details the consolidation process for entities with controlling interests (pp. 80-82).

The textbook also implicitly covers the fair value and cost methods as the alternatives when conditions for the equity method or consolidation are not met

aligning with ASC 321.

3. Wharton School

University of Pennsylvania. (2023). ACCT 7420: Financial Reporting and Business Combinations Course Syllabus.

The course curriculum covers "Accounting for Intercorporate Investments

" including the fair value method

the equity method

and business combinations/consolidations

confirming these as the standard methods taught in advanced accounting programs.