Current Practice Issue: Applying the Equity Method —Grant Thornton

 On the Horizon Offers Two Examples of Appropriate Ways to Apply FASB Guidance.  Plus: New Guidance on Reporting Discontinued Operations and Not-for-Profit Entities

Grant Thornton recently published a useful article on applying the equity method in its On the Horizon web-based publication, which also notes that the Fair Accounting Standards Board (FASB) has suggested new guidelines for reporting discontinued operations and that the American Institute of CPAs (AICPA) has released its guide on not-for-profit entities.    

When making an investment that requires accounting using the equity method, a company often pays an amount that is greater than its share of an investee’s underlying equity. FASB Accounting Standards Codification® (ASC) 323, Investments: Equity Method and Joint Ventures, requires an investor to account for the difference in its cost and the underlying net assets of the equity investee as if the investee were a consolidated subsidiary. Accordingly, an investor should account for the difference as it would when applying business combination accounting, with subsequent additional amortization (depreciation) recognized as an adjustment to its share of the investee’s income or loss.

On the Horizon then offers examples of how a hypothetical Company A and Company B might apply this guidance.   Read the whole issue for more, including additional short notices that FASB Suggests Improvements for Reporting Discontinued Operations and AICPA Releases Guide on Not-for-Profit Entities. 

 

 

Grant Thornton Offers Explanation of How to Apply Equity Method and Reports on New FASB and AICPA Guides