The financial accounting term ownership interest is used to describe the degree to which one company has acquired common stock in another. Ownership interest generally falls into three categories: controlling, significant influence, and passive.
Ownership interest represents a long-term investment in the common stock of another company, and is categorized as such on the acquiring company's balance sheet.
Unlike marketable securities, which are short term investments made in lieu of holding cash, an ownership interest in another company represents a long-term investment. The accounting treatment of these investments depends on the amount of outstanding stock held by the acquiring company (investor). Generally, ownership interest falls into three categories:
Controlling Interest: occurs when the investor holds more than 50% of the voting stock issued by a company. In this situation, the investor is referred to as the parent company, and the investee company is referred to as the subsidiary. When a parent company has controlling interest in a subsidiary, consolidated financial statements are typically prepared using the equity method.
Significant Influence: occurs when the investor holds between 20% and 50% of the voting stock issued by a company. FASB guidance provides some examples where an investor might own 20% or more voting shares but does not have significant influence over the investee. For example, the investee might oppose the investor's acquisition of stock, representation on the board of directors is denied, or voting stock in the investee is held by only a few individuals. When a company has significant influence over another, that investment is normally accounted for using the equity method.
Passive Interest: occurs when the investor holds less than 20% of the voting stock issued by a company. When a company has passive interest in another, that investment is normally accounted for using the cost method, or a lower of cost or market approach.
marketable securities: held-to-maturity, marketable securities: available-for-sale, marketable securities: trading, equity method, cost method
Explore Investing Further
Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
Looking for a way to avoid swap fees while trading forex?
By providing instant diversification for your portfolio, investing in ETFs can amplify the potential of any investor, novice or seasoned alike. We scoped the market to curate a list of the best ETF trading platforms available for US investors.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.
.jpg)
