Equity method

The way a company accounts for an investment over which it has significant influence, usually a 20% to 50% stake. It records its share of the investee's profit in its own income and adjusts the investment's carrying value, while dividends received reduce that value.

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Related terms

Accounting

• Amortization
• Balance sheet
• Cash flow
• Consolidated leverage ratio
• Debt
• Dividends
• EBITDA
• Equity
• Fair value through other comprehensive income
• Fair value through profit or loss
• Free cash flow
• GAAP
• Gross profit
• Interest income
• International Financial Reporting Standards
• Leverage
• Long-term debt
• Net change in cash
• Operating expenses vs. total expenses
• Operating income
• Price-to-sales and EV-to-sales ratios
• Reinvested profits
• Retained earnings
• Revenue recognition
• Solvency