Companies must always use the equity method when they hold between 25% and 50% of the common stock of an investee.

Question

Quizplus · Accepted Answer

The equity method is generally used when an investor has significant influence over the investee, typically indicated by ownership of 20% to 50% of the voting stock. However, the decision to use the equity method also depends on the actual ability to exercise significant influence, not just the percentage ownership. Other methods may be used if significant influence is not present.

Companies Must Always Use the Equity Method When They Hold