How is the Equity Method Applied to Equity Securities?
When the shares of stock held by an entity investor give such entity significant influence over the entity investee, the investee is called an associate. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. An associate, however, is not limited to an incorporated entity. It may also include an unincorporated entity such as a partnership or a joint venture. The existence of significant influence by an investor is usually evidenced in one or more of the following ways: • Representation on the board of directors or equivalent governing body of the investee. • Participation in policy-making processes, including participation in decisions about dividends or other distributions. • Material transactions between the investor and the investee. • Interchange of managerial personnel. • Provision of essential technical information. The existence of significant influence over the in
