A company should always use the equity method to account for an investment if:

Question

Quizplus · Accepted Answer

The equity method is used when a company has the ability to exercise significant influence over the operating policies of the investee. This influence is defined as the power to participate in the financial and operating policy decisions of the investee, but not to control those policies. Therefore, choice A is the best answer. B, C, and D are not correct answers as they do not apply to the criteria for using the equity method. E is also not correct, as the ability to exercise significant influence is a necessary condition for using the equity method.

A Company Should Always Use the Equity Method to Account