Video: Equity Method of Investments

In this lesson, follow along as Nick Palazzolo, CPA, delves into the equity method of accounting for investments, a key concept when a company has significant influence, typically indicated by owning 20% to 50% of another company. He explains how the investment’s carrying value increases with a proportionate share of earnings and decreases with dividends received, offering a clear contrast to other investment accounting methods like the cost method for non-voting stocks. Moreover, Nick outlines the presentation of these investments on the balance sheet, discussing the classification and valuation of trading securities, available-for-sale securities, and held-to-maturity securities, which hinges on aggregate fair values and maturity dates.