Under 50% Investment, Equity or Proport. Consol?

Simple question guys, although I can’t freaking remember.

If the company has signif. influence, but is under 50%, so not control and not a joint venture, under IFRS and GAAP I thought you use proportionate consolidation, but I just read it was equity… Help!


it’s equity. only IFRS JOINT VENTUR use proportionate

Significant influence and less than 50%? Thats definitely equity.

Passive Investment (Typically under 20%) - Investment in Financial Assets

Significant Influence (Typically between 20 - 50) - Equity Method

Joint Control (Typically 50/50) - Proportionate Consolidation

Control (Typically above 50%) - Acquisition Method (Full Consolidation)

The ability to influence the investee is the primary determinant of how to account for the investment, not necesarily the percentage ownership.

Thanks fellas

Also proportionate consolidation is IFRS only (although they have proposed to revise it to converge with GAAP).

It does not have to be 50/50 ownership though - it might be an odd occurence for someone to have a 70% economic interest but share control (equally) with the 30% venturer. But this would be a typical CFAI curve ball type questyion. The requirement is joint control so in your original question, if one entity has control it cannot be proportionate consolidation.