when an investor acquires 20 or more of the voting stock of an investee it is presumed that without evidence to the contrary that an investor maintains the ability to exercise significant influence over the investee conversely when an ownership position is less than 20 there is a presumption that the investor does not exert significant influence over the investee unless it can otherwise demonstrate such ability 
interestingly substantial or even majority ownership of an investee by another party does not necessarily prohibit the investor from also having significant influence with the investee for instance many sizable institutional investors may enjoy more implicit control than their absolute ownership level would ordinarily allow equity accounting vs cost methodif there is no significant influence over the investee the investor instead uses the cost method to account for its investment in an associated company the cost method of accounting records the cost of the investment as an asset at its historical cost on the other hand the equity method makes periodic adjustments to the value of the asset on the investor s balance sheet since they have a 20 50 controlling investment interest in the investee 