Apparently shareholders’ equity is the same under the Equity and the Proportionate consolidation method, but I can’t seem to understand this.
If a company has a 50% stake in another, under the prop consolidation method, it accounts for 50% of every line item under SE, however under the equity method, SE would just increase by 50% x (NI - Dividends).
But the investee’s SE can change due to other factors than NI or dividends, for example if there is additional paid in capital or if other comprehensive income changes. Under the prop method, half of it would appear on the investor’s BS under SE, but would it be taken into account under the equity method? The CFA book doesn’t say anything about that.
Thank you for your help.