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ARTICLE · 23 APRIL 2013

On The Horizon - April 9, 2013

Grant Thornton LLP
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FASB Accounting Standards Codification® 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.

United StatesAccounting and Audit
Grant Thornton'S Audit Practice Group
Grant Thornton'S Audit Practice Group
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Current practice issue

Applying the equity method

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.

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