equity method-sales, total asset

[h21]

does sales, ebit and etc dont have adjustment from equity method accounting? so equity method only apply to the one line in net income in the end
but why is that total asset item is adjusted? based on the investment in associate difference?
So if adjust to equity method, total asset is different due to investment in associate might be different but sales is the same? what is the income from associate called, just investment?
Thanks

 

[krokodilizm]

I think you are referring to the net income of the associate, i.e. the profits. Using equity accounting you get a share of this profit and add it to your profit. This increases your equity and also increases the value of the investment in your assets section.
Don’t confuse this with income from associate, which is called a dividend. A dividend increases cash balance and reduces investment balance so that total assets are unchanged and equity is untouched.

 

[h21]

krokodilizm wrote:
I think you are referring to the net income of the associate, i.e. the profits. Using equity accounting you get a share of this profit and add it to your profit. This increases your equity and also increases the value of the investment in your assets section.
Don’t confuse this with income from associate, which is called a dividend. A dividend increases cash balance and reduces investment balance so that total assets are unchanged and equity is untouched.

I guess i am confused why interest coverage, EBIT/interest expense,is not affected by the investment in associates

 

[S2000magician]

h21 wrote:

krokodilizm wrote:I think you are referring to the net income of the associate, i.e. the profits. Using equity accounting you get a share of this profit and add it to your profit. This increases your equity and also increases the value of the investment in your assets section.
Don’t confuse this with income from associate, which is called a dividend. A dividend increases cash balance and reduces investment balance so that total assets are unchanged and equity is untouched.

I guess i am confused why interest coverage, EBIT/interest expense,is not affected by the investment in associates

EBIT is income from operations; investments in associates are not part of operations, so they’re shown lower on the income statement.