Equity Method Financial Glossary

What is it? An accounting method used to reflect an investors interest in a company. This method is used when the investor owns 20 percent or more of the investee and has significant influence over the investee. Under the equity method, the investment is originally recorded on the books of the investor at its cost. Subsequently, the asset value of that investment on the investors financial statements is increased or decreased by the investors proportionate share of the increase or decrease in the investees net worth.

Finance Term Definition Added By: Alex

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