equity accounting

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The practice of showing in a company's accounts a share of the undistributed profits and a share of the net assets of another company in which it holds a share of the equity (usually a share of between 20% and 50%). The share of profit shown by the equity-holding company is usually equal to its share of the equity in the other company. Although none of the profit may actually be paid over, the company has a right to this share of the undistributed profit.

Subjects: Financial Institutions and Services.

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