Schroeder et al (2011) stated that long term assets such as property, plant and equipment are assets not easily converted to cash and represents the main source of a firm’s future existence. ...
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...20 percent or more of stocks, may have an influence on the investee. However, FASB Interpretation No. 35 suggests that regardless if an investor own 20 percent of a firm, they might be refrained from using the equity method due to the following explanation from Schroder et al (2011);
• The investee opposes the investor’s rights to use the equity method, by governmental regulatory authority and challenging the investor’s ability to exercise significant influence.
• Both parties have a signed agreement that the investor relinquish their rights as shareholders.
• Ownership of the investee is controlled by a small group which operates without regard to the views of other investors.
• The investor need or want more financial information than available to the investee’s other shareholders.
• The investor tries and fails to obtain representation on the board of directors.
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