What accounting method is appropriate when a company owns 20% to 50% of another company?

When a company owns between 20% and 50% of another company, the equity method of accounting is deemed appropriate. This method is utilized for situations where the investing company has significant influence over the investee, which is typically the case when ownership falls within this range. Under this method, the investor records its share of the investee's profits or losses directly in its income statement, reflecting its interest in the economic performance of the investee.

Additionally, the investment is initially recorded at cost, but over time, it is adjusted to recognize the investor's share of the investee’s earnings or losses. This approach provides a more accurate representation of the investor's financial situation, as it allows the financial statements to reflect the investee's performance and the impact of that investment on the investor's financial position.

In contrast, the other methods mentioned do not apply in this context. The cost method is used for investments where ownership is less than 20%, and there is no significant influence. The consolidation method is appropriate when ownership is greater than 50%, indicating a controlling interest. The fair value method may be applicable in certain situations, but it does not reflect the significant influence characteristic of ownership stakes between 20% and 50%.