Gumble Ltd. has owned 65% of the common shares of Lopez for several years. This year, Gumble reduced its interest in Lopez to 10%. Which of the following statements is true?

A) Gumble must change from reporting under consolidation to the equity method.
B) Gumble must change from reporting under consolidation to the cost method.
C) Gumble must change from reporting under the equity method to the cost method.
D) Gumble is not required to change its reporting method.

Common Shares

Equity securities representing ownership in a company, giving holders voting rights and a share in the company's profits via dividends.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted for the investor’s share of the investee’s profit or loss.

Cost Method

An accounting method used to value an investment, wherein the investment is recorded at its acquisition cost without recognizing periodic income but dividends received are recorded as income.