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What is Equity in Income of Affiliates?

When a company owns part but not all of another company, there are different ways to account for the investment. In the case of a significant ownership, but not enough to justify considering the investee a subsidiary, the company will report a separate line - equity in income of affiliates - representing the proportionate share of the investee’s profits. The revenue, expenses, assets and liabilities of the investee will not appear on the investor’s financial statements.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis

See also:
  • Adjusting Net Income for Unconsolidated Affiliates
  • The 3-Stage DuPont Model
  • Converting an Indirect Method Statement of Cash Flows to the Direct Method
  • Residual Income
  • Free Cash Flow to the Firm
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    This entry was posted on Wednesday, February 21st, 2007 at 1:14 pm and is filed under Accounting, Financial Statement Analysis, Fundamental Analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

    2 Responses to “What is Equity in Income of Affiliates?”

    1. Adjusting Net Income for Unconsolidated Affiliates - Financial Education - Everything You Need To Know About Finance Says:

      [...] article on equity income from affiliates described the income statement treatment for investments a company makes that result in it owning a [...]

      February 27th, 2007 at 11:29 am

    2. INTC: Intel and ST Micro Joint Venture - The Devil is in the Details - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] ownership stake of 45.1% suggests that the new company’s results will be reported using the equity method. This means, essentially, that only the JV’s net income and equity will appear on [...]

      May 22nd, 2007 at 7:59 am

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