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Technology Stocks : CNET: The Computer Network (NASDAQ:CNET)
CNET 1.270-1.6%Jan 21 2:43 PM EST
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To: Kip518 who wrote (260)7/21/1998 11:28:00 AM
From: Scott Stents  Read Replies (1) of 1133
 
Parent companies account for investments in companies different ways based on what % they own. This is covered in FASB 94, if you are looking for a good time on a Friday nite. Essentially,

if they own less than 50%, it is an affiliate, so if CNWK loses $, then only the "investment in affiliate" is debited on the NBC balance sheet, and NBC earnings are not affected at all. HOwever, at the subsidiary level (subsidiary is 50% + ownership of another firm), NBC earnings are affected (+ or -) by its % ownership of the loss/ profit.

Translation, NBC's option to buy the 60% should only be exercised upon profitability of CNWK, otherwise, the income statement of NBC will be affected by losses at CNWK. Hope this helps.
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