Equity Method Investments

Code: 1254
👁 Views: 39

Account Information

Account Type Statement of Financial Position
Normal Balance Debit

Definition

Investments accounted for using the equity method in associate companies

Common Journal Entries

Purchase equity in associate

Dr. Equity Method Investments
Cr. Bank Account

Record share of associate profits

Dr. Equity Method Investments
Cr. Investment Income

Receive dividends from associate

Dr. Bank Account
Cr. Equity Method Investments

Sell equity investment in associate

Dr. Bank Account
Cr. Equity Method Investments
Cr. Gain on Investments Sale

Purchase equity in associate

Dr. Equity Method Investments
Cr. Bank Account

Record share of associate profits

Dr. Equity Method Investments
Cr. Investment Income

Receive dividends from associate

Dr. Bank Account
Cr. Equity Method Investments

Sell equity investment in associate

Dr. Bank Account
Cr. Equity Method Investments
Cr. Gain on Investments Sale

International Accounting Standards

IFRS IAS 28 Investments in Associates

Equity method applied for significant influence (typically 20-50%). Share of profit recognised.

US GAAP ASC 323 Investments - Equity Method

Equity method similar to IFRS. Differences in how losses beyond investment are treated.