Intercorporate Investments Accounting - Ownership Categories

Intercorporate Investments Accounting - Ownership Categories | Finance Train

Companies commonly make equity or debt investments in other companies. Ownership can be minority (less than 50%) or majority (greater than 50%) and the degree of operational influence can be passive or active. Naturally, these differences lead to differences in accounting treatments for which the well-trained financial analyst must be prepared to interpret.

The following table shows the categories of ownership recognized by U.S. GAAP and IFRS for the purposes of public financial reporting.

INVESTMENT CATEGORY	LEVEL OF INVESTOR INFLUENCE	INVESTOR OWNERSHIP LEVEL	ACCOUNTING METHOD
Minority Passive	Not material.	Less than 20%	Four classes of accounting treatment:

held to maturity (HTM) 2) available for sale (AFS) 3) held for trading (HFT) 4) designated fair value instruments | | Minority Active | Significant. | 20% - 50% | Equity Method | | Joint Venture | Joint control. | Joint venture | US: Equity Method IFRS: Equity Method (proportionate consolidation previously allowed) | | Controlling Interest | Control. | More than 50% | Consolidation |