Bookkeeping

How and When to Use the Equity Method of Accounting for an Investment

Brell2025-06-19T10:25:14+00:00

Therefore, they reduce the carrying amount of the investment rather than being recognized as dividend income. For example, if an investor purchases 30% of an investee’s voting stock for $1,000,000 and incurs an additional $50,000 in legal and brokerage fees, the initial cost of the investment would be $1,050,000. Active involvement in the policy-making processes of the investee, even...

Consolidation Accounting Meaning, Rules, Example, Method

Brell2025-06-19T10:25:13+00:00

Under IFRS, the equity method is used to account for an investment in which a company has either a joint control or significant influence. In other circumstances, it would be appropriate for the investor to eliminate intra-entity profit in relation to the investor’s common stock interest in the investee. Company A records the amount of equity income exceeding the...