What is the consolidation method for an equity investment?
If the company purchases more than 50% of the outstanding shares, then the company will be required to “consolidate” the investment. Basically, this means that the investment will become a subsidiary that must be consolidated.
You might also be interested in...
What is the difference between the fair value method and the equity method?
The main difference relates to the amount of ownership the company has in another entity. If the company owns less than 20% of the outstanding shares for the company they invested in, then the fair value method (i.e., cost method) is used. If the company owns between 20% to 50% of the outstanding shares, then […]