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ARTICLE · 04 JULY 2016

Simplification Initiative: Equity Method of Accounting

Baker Newman Noyes
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The equity method of accounting is required for investments when the entity can influence the operating or financial decisions of the investee.

United StatesAccounting and Audit
Chelsea Reynolds
Chelsea Reynolds

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-07, Investments—Equity Method and Joint Ventures, Simplifying the Transition to the Equity Method of Accounting, which seeks to ease the application of the equity method of accounting. The ASU is one of many that the FASB has issued and will issue in conjunction with its Simplification Initiative. As noted in the ASU, "The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of the financial statements."

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