Financial Analysis Of Verizon Essay

The accounting method used to account for investments in common stock depends on the level of control that the investor has over the acquired company (investee). The cost method is used if the investor lacks significant influence over the investee operating and financial policies; this lack of control is usually due to a common stock ownership level of less than 20 percent. Dividends are treated as income and recognized when the investee declares dividends; the investor records only the corresponding share of the investee’s distributed earnings. Dividends declared by the investee in excess of earnings since acquisition by the investor are known as liquidating dividends. The investor treats liquidating dividends as a return of capital, and the investment account balance is reduced accordingly. From the investee’s point of view, these dividends are not liquidating dividends.

The equity method is used when the investor has “… significant influence over the operating and financial policies of the investee and consolidation is not appropriate.” …show more content…
Verizon and its subsidiaries provide communications, information and entertainment products and services to consumers, businesses and governmental agencies throughout the world. The company has two main business segments: Wireless and Wireline.
The accounting method applied to investments, equity or cost, is based on an evaluation of all significant terms of the investments that explicitly grant or suggest evidence of influence over the operations of the investee. Prior to February 21, 2014, Verizon reported a 23.1% ownership interest in Vodafone Omnitel, one of the largest communications companies in Italy. This investment in an unconsolidated business was accounted for using the equity method. Other investments include wireless partnerships in the US and limited partnership investments in entities that invest in affordable housing