Equity Method Facilitates Off-Balance Sheet Financing

Off-Balance Sheet Financing
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Hira Aziz, Pakistan
🔥NEW The Equity Method is a technique for recording the financial aspects of investments of one company in other companies. Any investments made by holding 20%-50% shares provide significant control over the investee company are recorded under the Equity Method. Unlike the Consolidation Method, which is used if there is effective control with more than 50% shares in the investee company. Although the Equity Method has been in use for many years, it also has been criticized by analysts and accountants due to its limitations. The reports investments as a one-line amount in the financial statements of the investor company. This practice does not provide sufficient information about the businesses and affairs of the investee company and keeps the specific liabilities and debts . The one-line consolidation only records the net (total) effect of the profits or losses of the investee. The investee company is still a separate entity; it can borrow funds or issue shares on its own, but of c (...) Read more? Sign up for free

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Equity Method Facilitates Off-Balance Sheet Financing
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