How does the percentage of ownership a company has in an investment effect them? Would the percentage of ownership be a big factor in your decision whether or not to invest in a company? Please explain.
How does the percentage of ownership a company has in an investment effect them? Would the percentage of ownership be a big factor in your decision whether or not to invest in a company? Please explain.
Investment in Associates and Joint venture and Subsidiary
Equity Accounting method - This method is used for accounting of investment in associates and joint venture, this method is account for only significant influence over the investee. Say for example X company purchase 25% equity of Y limited. In this case X limited not fully control the Y limited, it records its purchase consideration as Investment in Y limited.
Full Consolidation - This method is used for accounting when parents gets full control over the subsidiary. In this method consideration is compared with the fair value of asset acquired and goodwill and gain on bargain purchase is recorded if any. The process of consolidation is applied
Significant Influence
It refers to the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those. Investor is not take any decision in financial and operating policies but take part in such decision.
Other definition of Significant influence which includes if it holds 20% or more of voting power of investee.
Step by step
Solved in 2 steps
