Question

An investor has purchased less than 20% of the common stock available from each of 12 different investees. As part of their financial statements, they provide a report that details the cost and fair value for each of the investments. What is the purpose of this report?

Answer 1

Answer:

The investor wants to know about the fair value, cost and differences of these two in order to calculate the gains or losses for each of their investments

Explanation:

This helps them to calculate the losses arising because of the share prices fluctuations and best helps in assessing the future risks associated with the investment. This way of analyzing an investment and opting to whether sell or retain the investment is also reffered to as valueing investments on the basis of risks associated with investment. The investors also use this data to assess the performance of their investment in terms of gains and losses by the increase or decrease in the value of investment respectively.