Wize University Introduction to Financial Accounting Textbook > Investments
Classification of Investments
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Classification of Investments
When a company (the investor) is purchasing stock in another business (the investee), the expectations of both parties depend on the level of ownership the investor is taking
Non-Strategic
- Less than 20% of the shares are owned by the investor
- Not expecting to have active role
- Cost method or Fair Value method for accounting
Strategic
- 20% or more of the shares are owned by the investor
- Will exert a certain amount of influence
- Equity method for accounting or consolidation of financial statements
