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  • The Financial Encyclopedia
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Accounting

  Accounting   |   Terms
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  • March 23, 2021
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Equity Method Accounting

An accounting method for treating investments in associates (associate companies). Equity accounting is usually applied where an investor entity holds 20–50% of the voting stock of an associate (investee), and therefore has, or can exercise, significant influence on (but not control or joint control over) the latter’s management and operating policy decisions. Accordingly, an equity investment in an associate is initially recognized at cost and subsequently adjusted to reflect the investor’s share of the net assets of the associate.


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