# ASC 323-10-15: Investments—Equity Method and Joint Ventures — Overall — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/10/#15-scope-and-scope-exceptions) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:e4461eba112d95975e76b1eb86d52cea3ca4d4fe366f0d930f1c4c85aa4321d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/323/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [323-10-15-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:d6f38383adce24874c6437938a7c1db5ac7c2eec910daa744c954b929af2abf5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Investments—Equity Method and Joint Ventures Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Investments—Equity Method and Joint Ventures Topic. #### Entities ##### [323-10-15-2](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:63721b0a99f8e10e3c16f07de5284549365c4d7d49e1dca02b1386b235be21fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Investments—Equity Method and Joint Ventures Topic applies to all entities. #### Instruments ##### [323-10-15-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:5330744a87ae34eeb2758d95359ede611bf9114bfadab91da5e4e602886fe63e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Investments—Equity Method and Joint Ventures Topic applies to investments in [common stock](https://asc.understandingaccounting.org/glossary/c/#common-stock "A stock that is subordinate to all other stock of the issuer. Also called common shares.") or [in-substance common stock](https://asc.understandingaccounting.org/glossary/i/#in-substance-common-stock "An investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock.") (or both common stock and in-substance common stock), including investments in common stock of [corporate joint ventures](https://asc.understandingaccounting.org/glossary/c/#corporate-joint-venture "A corporation owned and operated by a small group of entities (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a corporate joint venture frequently is to share risks and rewards in developing a new market, product or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A corporate joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a corporate joint venture. The ownership of a corporate joint venture seldom changes, and its stock is usually not traded publicly. A noncontrolling interest held by public ownership, however, does not preclude a corporation from being a corporate joint venture.")(see paragraphs [323-10-15-13 through 15-19](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13) for guidance on identifying in-substance common stock). Subsequent references in this Subtopic to common stock refer to both common stock and in-substance common stock that give the [investor](https://asc.understandingaccounting.org/glossary/i/#investor "A business entity that holds an investment in voting stock of another entity.") the ability to exercise [significant influence](https://asc.understandingaccounting.org/glossary/s/#significant-influence "Paragraphs 323-10-15-6323-10-15-7323-10-15-8323-10-15-9323-10-15-10323-10-15-11 define significant influence.") (see paragraph [323-10-15-6](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-6)) over operating and financial policies of an [investee](https://asc.understandingaccounting.org/glossary/i/#investee "An entity that issued an equity instrument that is held by an investor.") even though the investor holds 50% or less of the common stock or in-substance common stock (or both common stock and in-substance common stock). ##### [323-10-15-4](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:2d1ab9704e4ae847a2a933339cb1a9b4da2ae5a047f671cf8dc50ad4f20b11f8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic does not apply to any of the following: 1. a An investment accounted for in accordance with Subtopic 815-10 2. b An investment in common stock held by a nonbusiness entity, such as an estate, trust, or individual 1. 1 [Subparagraph superseded by Accounting Standards Update No. 2012-04](https://asc.understandingaccounting.org/updates/asu-2012-04/). 2. 2 [Subparagraph superseded by Accounting Standards Update No. 2012-04](https://asc.understandingaccounting.org/updates/asu-2012-04/). 3. 3 [Subparagraph superseded by Accounting Standards Update No. 2012-04](https://asc.understandingaccounting.org/updates/asu-2012-04/). 3. c An investment in common stock within the scope of Topic 810 4. d Except as discussed in paragraph [946-323-45-2](https://asc.understandingaccounting.org/asc/323/946/#323-946-45-2), an investment held by an investment company within the scope of Topic 946. ##### [323-10-15-5](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:17dd1add077e82f434cd8ecd4d5b62cdfd97a312575f1181d08b1b92276c5979 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Overall Subtopic does not apply to any of the following: 1. a An investment in a partnership or unincorporated joint venture (also called an undivided interest in ventures), see Subtopic 323-30 2. b An investment in a limited liability company that maintains specific ownership accounts for each investor as discussed in Subtopic 272-10. #### Other Considerations ##### [323-10-15-6](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:5b5d88ba7fcb6e7b4ad8892b7e53d260ac24f4f3d28cba99a6b07f6b40758fa0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Ability to exercise significant influence over operating and financial policies of an investee may be indicated in several ways, including the following: 1. a Representation on the board of directors 2. b Participation in policy-making processes 3. c Material intra-entity transactions 4. d Interchange of managerial personnel 5. e Technological dependency 6. f Extent of ownership by an investor in relation to the concentration of other shareholdings (but substantial or majority ownership of the voting stock of an investee by another investor does not necessarily preclude the ability to exercise significant influence by the investor). ##### [323-10-15-7](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:382e129ddeb097c303ca9c85b439204990c093f0c84023db5f057095c5283a6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Determining the ability of an investor to exercise significant influence is not always clear and applying judgment is necessary to assess the status of each investment. ##### [323-10-15-8](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:76303f9c655f8b5b6a8f6f878dcb58f5f8014dbef821c820a6a57b15e13cfb40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. The equity method shall not be applied to the investments described in this paragraph insofar as the limitations on the use of the equity method outlined in paragraph [323-10-25-2](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-2) would apply to investments other than those in [subsidiaries](https://asc.understandingaccounting.org/glossary/s/#subsidiary "An entity, including an unincorporated entity such as a partnership or trust, in which another entity, known as its parent, holds a controlling financial interest. (Also, a variable interest entity that is consolidated by a primary beneficiary.)"). ##### [323-10-15-9](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:9739679ade8cfa48be588f4b952f748b57777e9459287665e93b64e7bc8cdb25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investor's voting stock interest in an investee shall be based on those currently outstanding securities whose holders have present voting privileges. Potential voting privileges that may become available to holders of securities of an investee shall be disregarded. ##### [323-10-15-10](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:8dbe14ef219b4bf0b3f6bf10cfb7b72d64e996247e876b6b9b39d93beaa775f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Evidence that an investor owning 20 percent or more of the voting stock of an investee may be unable to exercise significant influence over the investee's operating and financial policies requires an evaluation of all the facts and circumstances relating to the investment. The presumption that the investor has the ability to exercise significant influence over the investee's operating and financial policies stands until overcome by predominant evidence to the contrary. Indicators that an investor may be unable to exercise significant influence over the operating and financial policies of an investee include the following: 1. a Opposition by the investee, such as litigation or complaints to governmental regulatory authorities, challenges the investor's ability to exercise significant influence. 2. b The investor and investee sign an agreement (such as a [standstill agreement](https://asc.understandingaccounting.org/glossary/s/#standstill-agreement "An agreement signed by the investee and investor under which the investor agrees to limit its shareholding in the investee.")) under which the investor surrenders significant rights as a shareholder. (Under a standstill agreement, the investor usually agrees not to increase its current holdings. Those agreements are commonly used to compromise disputes if an investee is fighting against a takeover attempt or an increase in an investor's percentage ownership. Depending on their provisions, the agreements may modify an investor's rights or may increase certain rights and restrict others compared with the situation of an investor without such an agreement.) 3. c Majority ownership of the investee is concentrated among a small group of shareholders who operate the investee without regard to the views of the investor. 4. d The investor needs or wants more financial information to apply the equity method than is available to the investee's other shareholders (for example, the investor wants quarterly financial information from an investee that publicly reports only annually), tries to obtain that information, and fails. 5. e The investor tries and fails to obtain representation on the investee's board of directors. ##### [323-10-15-11](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:a3f845de4aaf0e474b44d5a25346f324d021f4f5b3e79c9ff4b60ef744d89dac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The list in the preceding paragraph is illustrative and is not all-inclusive. None of the individual circumstances is necessarily conclusive that the investor is unable to exercise significant influence over the investee's operating and financial policies. However, if any of these or similar circumstances exists, an investor with ownership of 20 percent or more shall evaluate all facts and circumstances relating to the investment to reach a judgment about whether the presumption that the investor has the ability to exercise significant influence over the investee's operating and financial policies is overcome. It may be necessary to evaluate the facts and circumstances for a period of time before reaching a judgment. ##### [323-10-15-12](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:9751cb8fbbde01712ce43cd131df0b871c0d88f17f5422be32d621ccadaef041 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investment in common stock of an investee that was previously accounted for on other than the equity method may become qualified for use of the equity method in accordance with paragraph [323-10-15-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-3) by an increase in the level of ownership described in that paragraph (that is, acquisition of additional voting stock by the investor, acquisition or retirement of voting stock by the investee, or other transactions). See paragraph [323-10-35-33](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-33) for guidance on all changes in an investor's level of ownership or degree of influence. ##### [323-10-15-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:0ac56f16a370ae8594379de47ebf21488ac9b1cee6d5a7b59a59553eb1ad340e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of this Topic, in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock. An investor shall consider all of the following characteristics when determining whether an investment in an entity is substantially similar to an investment in that entity's common stock: 1. a Subordination. An investor shall determine whether the investment has subordination characteristics that are substantially similar to that entity's common stock. If an investment has a substantive liquidation preference over common stock, it is not substantially similar to the common stock. However, certain liquidation preferences are not substantive. An investor shall determine whether a liquidation preference is substantive. For example, if the investment has a stated liquidation preference that is not significant in relation to the purchase price of the investment, the liquidation preference is not substantive. Further, a stated liquidation preference is not substantive if the investee has little or no subordinated equity (for example, common stock) from a fair value perspective. A liquidation preference in an investee that has little or no subordinated equity from a fair value perspective is nonsubstantive because, in the event of liquidation, the investment will participate in substantially all of the investee's losses. 2. b Risks and rewards of ownership. An investor shall determine whether the investment has risks and rewards of ownership that are substantially similar to an investment in that entity's common stock. If an investment is not expected to participate in the earnings (and losses) and capital appreciation (and depreciation) in a manner that is substantially similar to common stock, the investment is not substantially similar to common stock. If the investee pays [dividends](https://asc.understandingaccounting.org/glossary/d/#dividends "Dividends paid or payable in cash, other assets, or another class of stock and does not include stock dividends or stock splits.") on its common stock and the investment participates currently in those dividends in a manner that is substantially similar to common stock, then that is an indicator that the investment is substantially similar to common stock. Likewise, if the investor has the ability to convert the investment into that entity's common stock without any significant restrictions or contingencies that prohibit the investor from participating in the capital appreciation of the investee in a manner that is substantially similar to that entity's common stock, the conversion feature is an indicator that the investment is substantially similar to the common stock. The right to convert certain investments to common stock (such as the exercise of deep-in-the-money warrants) enables the interest to participate in the investee's earnings (and losses) and capital appreciation (and depreciation) on a substantially similar basis to common stock. 3. c Obligation to transfer value. An investment is not substantially similar to common stock if the investee is expected to transfer substantive value to the investor and the common shareholders do not participate in a similar manner. For example, if the investment has a substantive redemption provision (for example, a mandatory redemption provision or a non-fair-value put option) that is not available to common shareholders, the investment is not substantially similar to common stock. An obligation to transfer value at a specious future date, such as preferred stock with a mandatory redemption in 100 years, shall not be considered an obligation to transfer substantive value. ##### [323-10-15-14](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:1e83cf96815c1893c4aba4ff87182c48d7b34ab47bb0e48929c10b5e16c76b5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an investment's subordination characteristics and risks and rewards of ownership are substantially similar to the common stock of the investee and the investment does not require the investee to transfer substantive value to the investor in a manner in which the common shareholders do not participate similarly, then the investment is in-substance common stock. If the investor determines that any one of the characteristics in the preceding paragraph indicates that an investment in an entity is not substantially similar to an investment in that entity's common stock, the investment is not in-substance common stock. If an investee has more than one class of common stock, the investor shall perform the analysis described in the preceding paragraph and the following paragraph (if necessary) by comparing its investment to all classes of common stock. ##### [323-10-15-15](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:b9eeb97c29dc42fd3998fbb183c726beb8cac3fa6b1b0149120a16dd49012976 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the determination about whether the investment is substantially similar to common stock cannot be reached based solely on the evaluation under paragraph [323-10-15-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13), the investor shall also analyze whether the future changes in the fair value of the investment are expected to vary directly with the changes in the fair value of the common stock. If the changes in the fair value of the investment are not expected to vary directly with the changes in the fair value of the common stock, then the investment is not in-substance common stock. ##### [323-10-15-16](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:34c9232aa776ed1a50979b8322ca3888d540647d9d4b06f6e7f800d46a86b608 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The initial determination of whether an investment is substantially similar to common stock shall be made on the date on which the investor obtains the investment if the investor has the ability to exercise significant influence over the operating and financial policies of the investee. That determination shall be reconsidered if any of the following occur: 1. a The contractual terms of the investment are changed resulting in a change to any of its characteristics described in paragraph [323-10-15-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13) and the preceding paragraph. An expected change in the contractual terms of an investment that are provided for in the original terms of the contractual agreement shall be considered for purposes of the initial determination under paragraph 323-10-15-13 and not as a reconsideration event. However, a change in the form of the investment (for example, debt to equity or preferred stock to another series of stock) is a reconsideration event. 2. b There is a significant change in the capital structure of the investee, including the investee's receipt of additional subordinated financing. 3. c The investor obtains an additional interest in an investment in which the investor has an existing interest. As a result, the method of accounting for the cumulative interest is based on the characteristics of the investment at the date at which the investor obtains the additional interest (that is, the characteristics that the investor evaluated to make its investment decision), and will result in the investor applying one method of accounting to the cumulative interest in an investment of the same issuance. ##### [323-10-15-17](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:2a099016e67aa0e867ecb1f22b6bba9777c74f51b46a6ee04e07f12eefaee8b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The determination of whether an investment is similar to common stock shall not be reconsidered solely due to losses of the investee. ##### [323-10-15-18](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:8d531405292af98d78934bd3a5cffdaa089ee6eeb67241cd47aba855925c8a2a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an investor obtains the ability to exercise significant influence over the operating and financial policies of an investee after the date the investor obtained the investment, the investor shall perform an initial determination, pursuant to paragraphs [323-10-15-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13) and [323-10-15-15](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-15), using all relevant and necessary information that exists on the date that the investor obtains significant influence. ##### [323-10-15-19](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:52.830Z to 2026-09-09T23:39:52.830Z Record version: sha256:01541fc79a241cb726e76d2278e7deb6b0731a6e216dc7757800ecb6d3bb6a66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [323-10-55-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-1)) illustrates the application of the guidance in paragraphs [323-10-15-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-13) and [323-10-15-15](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-15).