Sony Corporation, the Japanese electronics manufacturer, prepares U.S. GAAP-based financial statements (in million yen). On its 2008 balance sheet it reported investments in affiliate companies of 381,188 and 236,779 for 2008 and 2007, respectively. It also reported income from equity investees of 31,509 on the 2008 income statement, and (31,509) appeared in the operating section of the 2008 statement of cash flows.
a. Describe the factors that may have explained the increase in the balance sheet value of investments in affiliate companies from 2007 to 2008.
b. Why does -31,509 appear in the operating section of the 2008 statement of cash flows?
c. How would income from these investments be computed if Sony chose to exercise the option to account for these equity investments using the fair market value option? What additional information would be needed, and what additional disclosures would be required?
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