long-term equity investment equity method

Long-term equity investment using the equity method in finance refers to the accounting and reporting approach used by an investor when it has significant influence over the investee, but not control or joint control. Under the equity method, the investor recognizes its share of the investee's net income or loss in its own income statement, and also adjusts the carrying value of its investment to reflect changes in the investee's equity. This method is typically used when the investor holds between 20% and 50% of the voting stock of the investee. The equity method allows the investor to reflect its investment in the financial statements in a way that is consistent with the economic substance of the investment. This means that the investor recognizes not only the dividends received from the investee, but also its share of the investee's profits and losses. By doing so, the investor is able to more accurately reflect the performance of the investee in its own financial statements. In addition to recognizing its share of the investee's income or loss, the investor also adjusts the carrying value of its investment to reflect changes in the investee's equity. This means that if the investee issues new shares, the investor's proportionate ownership will decrease, and vice versa. The equity method ensures that the investor's investment is carried at its fair value, and that changes in the investee's equity are reflected in the investor's financial statements. Overall, the equity method is a way for long-term equity investors to account for their investments in a way that reflects the economic substance of the investment, and provides a more accurate and comprehensive view of the investor's financial position and performance. It allows for the recognition of not only dividends received, but also the investor's share of the investee's profits and losses, and ensures that the carrying value of the investment is adjusted to reflect changes in the investee's equity.