equity method

equity method
A method of accounting for associated undertakings in which the investor initially discloses in its financial statements the amount of the investment at its cost, identifying any goodwill arising. In subsequent periods the carrying amount is adjusted by:
(1) the investor's share of the results of the associate, less any goodwill, amortization, or write off;
(2) the investor's share of any relevant gains or losses and any other changes in the investee's net assets.
The share of the associates' results is included immediately after the group operating profit in the consolidated profit and loss account. This method is required by Financial Reporting Standard 9.

Accounting dictionary. 2014.

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