The equity method is required to be used when an investor has the ability to exert significant influence over the affiliate.

Question

Quizplus · Accepted Answer

The equity method is used when an investor has significant influence, defined as the ability to participate in the financial and operating policy decisions of the affiliate, but not control over those decisions. This is typically demonstrated by ownership of between 20% and 50% of the voting stock of the affiliate.

The Equity Method Is Required to Be Used When an Investor