Equity Method and Consolidation

I’m still a bit confused.

Equity Method:

Income statement = Equity Income for the period

Balance sheet entry = Beginning investment + Equity Income - % of Dividends paid

So do assets and equity change by the same amount? or they do not change?

Consolidation (less than 100%):

pick up 100% sales, expenses, assets, liability and what happen to NI and equity?

How do they compare to those under equity method?

And what are the effects on balance sheet if partial/full goodwill is used?


Stuck on the same points… Any expert who could throw some light on this please…

Equity Method:

Income statement: Purely equity income * % owernship. This is similar to “interest” income, meaning it does not impact operating income but hits net income

Balance sheet: Carrying value + (NI - dividends)*% ownershit = asset value

No liabilities, straight pump to equity via the income statement


Income Statement: Record 100% of the units income statement as if it were the parent’s own. Only difference is minority interest credit is used in the income statement below operating income.

Balancesheet: Carry at 100% ownership as an asset, carry 100% ownership of liabilities, offset ownership % in equity to balance. This will be a positive number but is actually a reduction to equity. Said differently, equity holders do not have the rights to the assets of the % ownership in the consolidated entitiy, hence the seperate entry in equity.

In Equity Method,

the Assets and liablities do NOT change…

In consolidation,if consolidation is 80%

We add 100% of Sub Assets and Liabilities Incomes and Expenses to the holding companies BS but we show 20% as Minority Stake in Equity…

I hope i have made some contribution…