sameeragarwal

it depends on amount of control that can be inserted. In spite of having > 50% of the target company, if you are unable to exert control over the company, yes - Equity method can be used.

key point to differentiate (or an issue to understand) with regards to the equity method is that --> are you trying to make use of the equity method only for the purpose of reporting the share of the profits? Since you assets increase by a small amount - but you get a share of the profits - your performance measures ROE, ROA may be inflated using the Equity method. When you use Consolidation method - you are accounting for more of the assets. Additionally Net Profit Margin - in Equity method would be inflated - since you include earnings pro-rata share, but no sales. In consol - sales is also included - so your NI/Sales would be deflated with Consol. method.

CP

bingbingliang

vinniepaz730 Wrote:
-------------------------------------------------------
> thanks.
>
> can anyone explain ,is the equity method allowed
> for business >50%


No it wont. Because then you would have significant influence along with control over the business.

I fail to see how you would own more than 50% of the business and not have control over it.

bingbingliang

they should mean the same thing unless they specifiy proportionate consol.

RMontgomery

thanks.

can anyone explain ,is the equity method allowed for business >50%