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On the Radar

Equity Method Investments and Joint Ventures

October 2021
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On the Radar
Equity Method Investments and Joint Ventures

An investor must consider the substance of a transaction as well as the form of an investee when determining the appropriate accounting for its ownership interest in the investee. If the investor does not control the investee and is not required to consolidate it, the investor must evaluate whether to use the equity method to account for its interest. This evaluation frequently requires the use of significant judgment.

Footnotes

1
For investments in a corporation or a limited liability company that does not have separate capital accounts, ASC 323-10-15-13 requires entities to assess whether the investments are in-substance common stock.