Investments in Equity Interests (aka Associate Companies) appear on assets when you own what range of ownership in another company?

• A. Greater than 50%
• B. Between 20% and 50%
• C. Less than 20%
• D. 0% to 10%

Answer: (B)

Having enough ownership to exercise significant influence—typically between 20% and 50% of voting shares—puts the investment into the category of associates. In this case you use the equity method: you record the initial cost, then increase the asset by your share of the investee’s earnings and decrease it by your share of losses or dividends received. The result is a carrying amount on your balance sheet labeled as an investment asset. If ownership were above 50%, you’d consolidate the subsidiary’s financials instead of carrying it as an investment asset. If ownership is below 20%, the investment is usually considered passive and measured at cost or fair value, not by the equity method. Thus, investments in equity interests appear as assets when ownership is between 20% and 50%.