When exactly does "significant influence" trigger the equity method? Is it always at 20%?

It's a presumption, not a hard rule. Both US GAAP (ASC 323) and IFRS (IAS 28) define significant influence as "the power to participate in the financial and operating policy decisions of the investee, but not control or joint control." The 20% threshold is just a shortcut.

Indicators of significant influence below 20%:

• Board representation. A seat on the investee's board, especially with informal influence over other directors.
• Material intercompany transactions. A vendor relationship where the investor is the investee's primary customer (or vice versa) often establishes influence.
• Interchange of managerial personnel. Executive secondments between the investor and investee.
• Provision of essential technical information. The investor providing IP or technology that the investee depends on.
• Participation in policy-making. Direct involvement in setting product roadmap, pricing strategy, or capital allocation.

If any of these are present, significant influence can be argued at 15%, 10%, or even lower.

Indicators that BLOCK significant influence above 20%:

• Strong contractual restrictions. Other shareholders have controlling rights that override the investor's vote share.
• Strategic shareholder agreement. The shareholders agree to a voting block that the investor is not part of.
• Government restrictions. Foreign-investment restrictions (common in regulated industries) that prevent the investor from exercising influence.
• Litigation freezing votes. Ongoing court proceedings that nullify the investor's voting rights.

In any of these cases, even a 30% stake may not trigger the equity method — fair-value accounting would apply instead.

Real-world examples:

• Apple's 1995 investment in ARM Holdings. Apple owned around 18% but had significant influence via technology partnership. Equity method applied.
• Berkshire Hathaway's ~6% stake in Apple. Berkshire technically has zero board representation and exercises no influence. Fair-value method applies despite the large notional position.
• Many SPAC sponsor stakes. Sponsors often own under 20% but have effective control through founder shares and warrants. May trigger consolidation, equity method, or fair-value method depending on facts.

Exam framing:

The CFA exam usually gives you a vignette where the 20% threshold IS the rule. Only one or two questions per cycle test the nuanced "indicators of significant influence" framework. If the vignette mentions board seats, intercompany transactions, or technology dependence, the question is testing the nuanced framework — not the 20% shortcut.

Bottom line:

20% is a useful shortcut but not the law. Look for the substance of influence in any equity-method question.