thebulkoftheseassetsatmarketlevelseachperiod.Thisis
called marking to market and provides one of the few
instances in which market value trumps book value in
accounting statements.
Minority Active Investments
If thesecurities or assets ownedin another firm represent
between 20 percentand 50 percentoftheoverallownership
of that firm,an investment istreated as a minority active
investment. While these investments have an initial
acquisitionvalue,aproportionalshare(based onownership
proportion)ofthenetincomeandlossesmadebythefirmin
which the investment was made is used to adjust the
acquisitioncost.Inaddition,thedividendsreceivedfromthe
investment reduce the acquisition cost. This approach to
valuing investments is called the equity approach.
Themarketvalueoftheseinvestmentsisnotconsidereduntil
theinvestmentisliquidated,atwhichpointthegainorloss
from the sale, relative to the adjusted acquisition cost, is
shown as part of the earnings in that period.
Majority Active
InvestmentsIfthesecuritiesorassetsownedinanotherfirm
representmorethan 50 percent oftheoverall ownershipof
that firm, an investment is treated as a majority active
investment.
31 In this case, the investment is no longer shown as a
financialinvestmentbutisinsteadreplacedbytheassetsand
liabilitiesofthefirminwhichtheinvestmentwasmade.This
approachleadstoaconsolidationofthebalancesheetsofthe