Equity Method

   

Definition: the Equity Method is a tool of accounting used by companies to record their equity investments in a separate company or entity which becomes their associate company or joint venture company. With the help of the equity method, the investor company (holding or parent company) values its investment and its share in the profits and losses of the investee company.
According to both accounting standards (US GAAP and IFRS), a holding company should use the equity method when it has less than majority shares in the subsidiary company but it does have a significant influence over the operational activities of the subsidiary company.


   
   

More on accounting and auditing: Accounting Cycle, Accounts Payable, Accounts Receivable, Amortization, Appreciation, more...



   

MBA Brief offers accurate and concise definitions of MBA concepts, frameworks, methods and models.

We love to keep things really short, but provide links to learn more about your subject and to similar concepts.





© 2021 MBA Brief - Last updated: 28-10-2021  -  Privacy   |   Terms