Equity Method Investments

Code: 1254
👁 Views: 113

Account Information

Financial Statement 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

📐 IFRS vs US GAAP Accounting Treatment

IFRS IAS 28 Investments in Associates
US GAAP ASC 323 Investments - Equity Method

❓ Frequently Asked Questions

Q: What are investments in associates?

A: Investments in companies where the investor has significant influence (usually 20-50% voting rights), accounted for using the equity method.

Q: How is the equity method applied?

A: The investment is increased or decreased by the investor's share of the associate's profits or losses, and reduced by dividends received.