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    Equity Securities: Method. If 20-50% of The Stock Is Owned, The Investor Is Usually Able To Significantly

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    The accounting method used for an equity security investment depends on the level of control and influence the investing company has over the issuing company. If less than 20% is acquired with no influence, the cost method is used. Between 20-50% ownership allows for significant influence, using the equity method. Owning over 50% constitutes control, requiring use of consolidated financial statements. The level of influence determines the appropriate accounting treatment, rather than just percentage of ownership.

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    Equity Securities: Method. If 20-50% of The Stock Is Owned, The Investor Is Usually Able To Significantly

    Uploaded by

    Ella
    13 views1 page
    The accounting method used for an equity security investment depends on the level of control and influence the investing company has over the issuing company. If less than 20% is acquired with no influence, the cost method is used. Between 20-50% ownership allows for significant influence, using the equity method. Owning over 50% constitutes control, requiring use of consolidated financial statements. The level of influence determines the appropriate accounting treatment, rather than just percentage of ownership.

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    The accounting method used for an equity security investment depends on the level of control and influence the investing company has over the issuing company. If less than 20% is acquired with no influence, the cost method is used. Between 20-50% ownership allows for significant influence, using the equity method. Owning over 50% constitutes control, requiring use of consolidated financial statements. The level of influence determines the appropriate accounting treatment, rather than just percentage of ownership.

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    13 views1 page

    Equity Securities: Method. If 20-50% of The Stock Is Owned, The Investor Is Usually Able To Significantly

    Uploaded by

    Ella
    The accounting method used for an equity security investment depends on the level of control and influence the investing company has over the issuing company. If less than 20% is acquired with no influence, the cost method is used. Between 20-50% ownership allows for significant influence, using the equity method. Owning over 50% constitutes control, requiring use of consolidated financial statements. The level of influence determines the appropriate accounting treatment, rather than just percentage of ownership.

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    EQUITY SECURITIES

    An equity security is an investment in stock issued by another company. The


    accounting for an investment in an equity security is determined by the amount of
    control of and influence over operating decisions the company purchasing the stock has
    over the company issuing the stock. If less than 20% of the stock is acquired and no
    significant influence or control exists, the investment is accounted for using the cost
    method. If 20–50% of the stock is owned, the investor is usually able to significantly
    influence the company it has invested in. Assuming the investor does not control the
    number of positions on the Board of Directors or hold key officer positions, this
    investment would be accounted for using the equity method. If the investor has 50% or
    more of a company's stock, significant influence and control are deemed to exist and
    the investor reports its results using consolidated financial statements. Although
    percent of voting stock owned serves as a guideline, the amount of influence and
    control is used to determine the accounting for equity securities.

    Equity securities are financial assets that represent shares of a corporation. The most
    prevalent type of equity security is the common stock. And the characteristic that most defines
    an equity security, differentiating it from most other types of securities, is “ownership.”

    If you own an equity security, your shares represent part ownership of the issuing company. In
    other words, you have a claim on a percentage of the issuing company’s earnings and assets. If
    you own 1% of the total shares, or security stocks, issued by a company, your part ownership of
    the controlling company is equivalent to 1%.

    Source: https://www.cliffsnotes.com/study-guides/accounting/accounting-principles-
    ii/investments/accounting-for-equity-securities
    https://tickertape.tdameritrade.com/investing/equity-securities-debt-securities-16959

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