When is consolidation valuation applicable for equity holdings?

Consolidation valuation is applicable for equity holdings when ownership exceeds 50%. This is based on the principle that control of a subsidiary is generally associated with owning more than half of the voting shares, allowing the parent company to dictate financial and operating policies. When a company owns more than 50% of another company, it typically has the power to influence decisions and may exercise significant control, thus necessitating the consolidation of financial statements to present a complete and accurate picture of the financial position and results of operations.

In contrast, ownership levels below 50% usually reflect a minority stake, where the investor does not have the ability to control the company and cannot dictate its financial and operational policies. This means that under these circumstances, equity is typically accounted for using methods such as the cost method or equity method, depending on the level of influence rather than consolidation. The ownership threshold of exactly 50% implies a lack of decisive control if there are other shareholders with equal voting rights, making it less clear whether consolidation should apply.