Edwards Industries, Inc. v. Tracy

The sole issue presented by this case is whether or not appellant can deduct as appreciation the $3,711,010 in retained earnings that the equity method of accounting permitted it to include on its balance sheet as of the date of the transfer of the JTE stock.

Accounting Principles Board Opinion No. 18, entitled “The Equity Method of Accounting for Investments in Common Stocks,” summarizes the equity method of accounting in part as follows:

“An investor initially records an investment in the stock of an investee at cost, and adjusts the carrying amount of the investment to recognize the…