Equity Method Simple Confusion

CFA Level II FRA
#1

I have a quick question on equity method, it is not explicitly stated in the official online curriculum the distinction between fair value option and amortization option. For amortization, it is recording the access of fair value over book value for assets and then depreciating/amortizing it over the remaining life span. And goodwill is recorded after that. For fair value option, there is no depreciation or amortization or goodwill.

Am i understanding this correctly? That a firm can only choose either the fair value option or amortization option at the start of investment in associates? And can it be chosen for specific assets in the investment, or it has to be applied to the entirety of the investment? Thank you.

#2

From what I remember, if you go with the fair value option, there’s no depreciation or amortization, and it applies to the whole investment, not just specific assets. I think once you choose it, you’re locked in. For the amortization method, you depreciate the excess of fair value over book value, but goodwill isn’t amortized. I had trouble with this too, but once you go through a few questions, it clicks.

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