Equity method in accounting is the process of treating investments in associate companies. Equity accounting is usually applied where an investor entity holds 20–50% of the voting stock of the associate company, and therefore has significant influence on the latter's management. Under International Financial Reporting Standards, equity method is also required in accounting for joint ventures.[1] The investor records such investments as an asset on its balance sheet. The investor's proportional share of the associate company's net income increases the investment (and a net loss decreases the investment), and proportional payments of dividends decrease it. In the investor’s income statement Equity accounting may also be appropriate where the investor has a smaller interest, depending on the nature of the actual relationship between the investor and investee. Control of the investee, usually through ownership of more than 50% of voting stock, results in recognition of a subsidiary, whose financial statements must be consolidated with the parent's. The ownership of less than 20% creates an investment position, carried at historic book or fair market value (if available for sale or held for trading) in the investor's balance sheet.
^"Equity Method". IFRScommunity. 14 May 2020. Retrieved 2020-08-27.
Further readingedit
Morris, James E. (2004). Accounting for M&A, Equity, and Credit Analysts. New York: McGraw-Hill. ISBN0-071-42969-7.
Rosenfield, Paul; Steven Rubin (1985). Consolidation, Translation, and the Equity Method: Concepts and Procedures. New York: John Wiley & Sons. ISBN0-471-81357-5.
External linksedit
IAS 28 INVESTMENTS IN ASSOCIATES
December 18, 2023
equity, method, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, citations, reliable, sources, unsourced, material, challenged, removed, find, sources, news, newspapers, books, scholar, jstor, january, 20. This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Equity method news newspapers books scholar JSTOR January 2021 Learn how and when to remove this template message Equity method in accounting is the process of treating investments in associate companies Equity accounting is usually applied where an investor entity holds 20 50 of the voting stock of the associate company and therefore has significant influence on the latter s management Under International Financial Reporting Standards equity method is also required in accounting for joint ventures 1 The investor records such investments as an asset on its balance sheet The investor s proportional share of the associate company s net income increases the investment and a net loss decreases the investment and proportional payments of dividends decrease it In the investor s income statement Equity accounting may also be appropriate where the investor has a smaller interest depending on the nature of the actual relationship between the investor and investee Control of the investee usually through ownership of more than 50 of voting stock results in recognition of a subsidiary whose financial statements must be consolidated with the parent s The ownership of less than 20 creates an investment position carried at historic book or fair market value if available for sale or held for trading in the investor s balance sheet Contents 1 See also 2 References 3 Further reading 4 External linksSee also editBusiness valuation Enterprise value Minority interestReferences edit Equity Method IFRScommunity 14 May 2020 Retrieved 2020 08 27 Further reading editMorris James E 2004 Accounting for M amp A Equity and Credit Analysts New York McGraw Hill ISBN 0 071 42969 7 Rosenfield Paul Steven Rubin 1985 Consolidation Translation and the Equity Method Concepts and Procedures New York John Wiley amp Sons ISBN 0 471 81357 5 External links editIAS 28 INVESTMENTS IN ASSOCIATES Retrieved from https en wikipedia org w index php title Equity method amp oldid 1014341470, wikipedia, wiki, book, books, library,
