equity method


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equity method

A method of accounting for an investment in another company in which the book value of the investment reflects a share of the acquired firm's increases in retained earnings. Thus, if Firm A purchases 20% of Firm B's stock and Firm B earns $3 million after taxes during the next year, Firm A will increase the carrying value of its investment by 20% of $3 million, or $600,000. If Firm B pays half its earnings in dividends, Firm A will increase its investment by $300,000.
References in periodicals archive ?
Income before income taxes and equity in earnings of equity method investees
Operating profit for the business segments includes the Corporation s share of earnings or losses from equity method investees because the operating activities of the equity method investees are closely aligned with the operations of the Corporation s business segments.
5 compared to the same period of a year ago, increasing in the fiscal first half for the 9th consecutive year and achieved an all-time record for any fiscal first half due mainly to increased income of affiliates in Asia accounted for under the equity method.
The AICPA's Accounting Standards Executive Committee has issued Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies, effective for fiscal years beginning on or after Dec.
Although Dell has a 70% equity interest in DFS, prior to the third quarter of fiscal 2004, the investment was accounted for under the equity method because the company historically could not, and currently does not, exercise control over DFS.
The top Japanese drug maker said profits at its equity method affiliates dropped 37.
The company's initial book basis in the new joint venture will be approximately $4 million and it will be accounted for under the equity method.
The instructions require only an amount in column (A) for income statement income (loss) from any equity method foreign corporation; the instructions also require that any dividends from equity method foreign corporations be reported in column (D) of lines 2 through 4.
The AICPA's Accounting Standards Executive Committee has issued an exposure draft of a statement of position, Clarification of the Scope of the Audit and Accounting Guide Audits of Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.
This interpretation stands in contrast to APB #18 that prescribes the equity method of accounting for corporate joint ventures but is unclear as to the accounting for unincorporated entities.
Equity Method for Investments: It may be necessary to make an equity investment greater than 20 percent (but less than 50.
We critically examine the three principal reporting methods for significant-influence investments - the equity method, the expanded equity method and proportionate consolidation - and evaluate each on its ability to provide sufficient and relevant analytical information to managers and analysts.