The following are excerpts from the 2019 financial statements of Renault, a large French automobile manufacturer.

In view of this situation, Renault is considered to exercise significant influence over Nissan, and therefore uses the equity method to include its investment in Nissan in the consolidation. Renault’s Note 12-D lists various restatements that Renault makes when accounting for its Nissan investment under the equity method. Some of those changes harmonize Nissan’s accounting (under Japanese accounting standards). Others reflect adjustments to fair value of assets and liabilities applied by Renault at the  time of acquisitions in 1999 and 2002.

Required:
1. Go to Deloitte’s IAS Plus website and examine the summary of the IASB’s IAS No. 28 (https://www.iasplus.com/en/standards/ias/ias28-2011), which governs application of the equity method. Focus on two areas: Identification of Associates and Applying the Equity Method of Accounting.
2. Evaluate Renault’s decision to use the equity method to account for its investment in Nissan. Does Renault have insignificant influence, significant influence, or control?
3. Evaluate the fact that, when accounting for its investment in Nissan under the equity method, Renault makes adjustments that take into account the fair value of assets and liabilities at the time Renault invested in Nissan. Give an example of the sorts of adjustments that might be made. Are such adjustments consistent with IFRS? With U.S. GAAP? Explain.
4. Evaluate the fact that, when accounting for its investment in Nissan under the equity method, Renault makes adjustments for harmonization of accounting standards. Are such adjustments consistent with IFRS? With
U.S. GAAP? Explain.

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12-INVESTMENT IN NISSAN Renault and the Japanese automaker Nissan have developed an alliance between two distinct companies with common interests, uniting forces to achieve optimum performance. The Alliance is organized so as to preserve individual brand identities and respect each company's corporate culture. Consequently: • • Renault is not assured of holding the majority of voting rights in Nissan's Shareholders' Meeting; The terms of the Renault-Nissan agreements do not entitle Renault to appoint the majority of Nissan directors, nor to hold the majority of voting rights at meetings of Nissan's Board of Directors; Renault cannot unilaterally appoint the President of Nissan; • In March 2019, Renault, Nissan and Mitsubishi announced the creation of the new Alliance Board, a supervisory body to oversee Alliance operations and governance involving Renault, Nissan and Mitsubishi. This Board has four members: The Chairman of the Board of Renault, the Chief Executive Officer of Renault, the Chief Executive Officer of Nissan and the Chief Executive Officer of Mitsubishi Motors. Decisions are taken by consensus. In November 2019, the Board added the post of Alliance General Secretary, who reports to the Alliance Board and the CEOs of the three alliance companies; • At December 31, 2019, the Renault Group occupied two seats on Nissan's Board of Directors and was represented by Jean-Dominique Senard, Chairman of the Renault Board. The appointment of Pierre Fleuriot to replace Thierry Bolloré will be put to the vote at the next extraordinary general sharehold- ers' meeting to be held on February 18, 2020. Pierre Fleuriot is the senior independent director in the Groupe Renault; • Renault can neither use nor influence the use of Nissan's assets in the same way as its own assets; • Renault provides no guarantees in respect of Nissan's debt.