Definition for : Equity method
In the process of drawing up Consolidated accounts, the equity method consists in replacing the carrying amount of the shares held in an Associate (also known as an Equity affiliate or Associated undertaking) with the corresponding portion of the Associate's Shareholders' equity (including Net income). This method is used when the Parent company exercises Significant influence over the operating and financial policy of its Associate. This method is purely financial. Both the group's investments and aggregate Profit are thus reassessed on an annual basis. Accordingly, the IASB regards the equity method as being more of a valuation method than a Consolidation method.
(See Chapter 6 Getting to grips with consolidated accounts of the Vernimmen)
To know more about it, look at what we have already written on this subject