The equity method sits between two simpler treatments. Below roughly 20% ownership, an investment is usually carried at fair value or cost. Above 50%, the investee is fully consolidated line by line. In between, the investor shows one line on the balance sheet and one line on the income statement. If a company owns 30% of a joint venture that earned $20M, it records $6M of income and increases the investment balance by the same amount, less any dividends received.
Ownership percentage is a guideline, not the rule. Board seats, technology dependence or veto rights can create significant influence below 20%, and lack of influence can rebut it above 20%. Judgment calls here are common audit discussion points.
In software: consolidation platforms such as OneStream and CCH Tagetik apply the equity method automatically based on each entity's consolidation method setting, so the same structure handles full consolidation, proportional cases and equity-method investees.
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