A company that acquires less than 20% ownership interest in another company should account for the share investment in that company using

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According to accounting standards, if a company acquires less than 20% ownership interest in another company, it should use the cost method of accounting for the share investment. Under the cost method, the investment is initially recorded at its cost and subsequently adjusted for any dividends or changes in value. The equity method is used when the ownership interest is between 20% and 50%, while consolidated financial statements are prepared when the ownership interest is over 50%. The significant method is not a recognized accounting method.

A Company That Acquires Less Than 20% Ownership Interest in Another