We account for an investment in vot

We account for an investment in voting stock that gives the investor the ability to exercise significant
influence over the financial and operating policies of the investee using the equity method
of accounting. GAAP requires the equity method of accounting for an investment in common
stock by an investor whose investment in common stock gives it the ability to exercise significant
influence over operating and financial policies of an investee even though the investor holds 50
percent or less of the voting shares.[6]
GAAP bases the ability to exert significant influence on a 20 percent ownership test:
An investment (direct or indirect) of 20 percent or more of the voting stock of an investee
shall lead to a presumption that in the absence of predominant evidence to the
contrary an investor has the ability to exercise significant influence over an investee.
Conversely, an investment of less than 20 percent of the voting stock of an investee
shall lead to a presumption that an investor does not have the ability to exercise significant
influence unless such ability can be demonstrated.[7]
An investor may be able to exert significant influence over its investee with an investment
interest of less than 20 percent, according to GAAP. The following statement from AT&T Inc.’s
2009 annual report (p. 73) provides an example of the exception:
As of December 31, 2009, our investments in equity affiliates included an 9.8% interest
in Telefonos de Mexico, S.A. de C.V. (Telmex), Mexico’s national telecommunications
company, and an 8.8 percent interest in America Movil S.A. de C.V. (America
Movil), primarily a wireless provider in Mexico, with telecommunications investments
in the United States and Latin America.
GAAP[8] cites (1) opposition by the investee that challenges the investor’s influence,
(2) surrender of significant stockholder rights by agreement between the investor and investee,