"Equity securities in which the investor lacks the ability to participate in the decisions of the investee company are classified as no-significant influence equity investments."
When one business—the investor—has a big impact on another business—the investee—the equity method is the go-to strategy.
An organization is said to have significant influence when it owns 20% to 50% of the equity of another organization. Control over an entity's operating and financial policy decisions is not a significant influence; it is the ability to take part in those decisions.
In international financial reporting standards, the idea is employed. Instead of using the impact approach to account for its investment in a related company, the investor chooses to utilize the cost method if there is no major impact on the investee.
The investment's cost is accounted for using the cost method of accounting as an asset at its historical cost. Therefore, no-significant influence equity is the correct answer.
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