Equity method investments

Equity method investments are stakes a company holds in another company, typically an associate or joint venture, where it has significant influence but not full control, generally meaning it owns somewhere between twenty and fifty percent of the other business. These stakes sit on the balance sheet rather than being consolidated into the parent company's own revenue and expenses.

Instead of adding the associate's full revenue and costs into its own income statement, the investing company reports its proportional share of the associate's profit or loss as a single line, and adjusts the investment's carrying value on the balance sheet accordingly. This can make it harder to see the underlying business activity of the associate directly from the parent company's headline financial statements alone.