Video: Equity Investment Categories

In this lesson, Nick Palazzolo, CPA, introduces the classification of equity investments based on the percentage of ownership in another company. He explains the fair value method as the approach used when owning less than 20% of a company and provides a humorous comparison to put the concept into perspective. For those instances where ownership falls between 20% and 50%, he outlines the equity method and hints at the nuances of the cost method without delving too deeply into details. Nick goes on to describe consolidations, applicable when ownership exceeds 50%, and how financial statements are combined in such circumstances. Throughout the lesson, he offers a glimpse into future content, setting the stage for an in-depth exploration of equity categories, while keeping the focus on the immediate implications for equity classification and valuation.