Significant Influence
- Power to participate in financial and operating decisions but not control
- Matter of judgement
- GR: Investor holds directly or indirectly 20% or more of the voting power
XPN: unless clearly demonstrated
Equity Method
- Based on economic relationship between investor and investee
- Investor and investee are viewed as single economic unit
- Dividend received from the investee reduces the carrying amount of investment
- Applicable when investor has significant influence
- Influence over investee (20% - 50%)
Investment
must be ordinary share.
initially, at cost
subsequently, increased by net income of investee and decrease by net loss of investee