# ASC 323-10-25: Investments—Equity Method and Joint Ventures — Overall — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/10/#25-recognition) 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): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:bd912d71f59473a486c4d0f81b1a65d4ed5b1755b7059ee3c21e894511dea838 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/323/10/#25-recognition) SEC content: no #### Terminology ##### [323-10-25-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:c8109c195772612a34e84c736282cbeecb7562da52f56e0a44db0820464948ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-10-15-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-3) explains that references in this Subtopic to [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.") refer to both common stock and [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.") 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.") 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). #### The Equity Method—Overall Guidance ##### [323-10-25-2](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:ce87630188885ebbae605a62151c0d9e5092afdb6e25d08beeb789d31bb400f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investor shall recognize an investment in the stock of an investee as an asset. The equity method is not a valid substitute for consolidation. The limitations under which a majority-owned [subsidiary](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.)") shall not be consolidated (see paragraphs [810-10-15-8 through 15-10](https://asc.understandingaccounting.org/asc/810/10/#810-10-15-8) ) shall also be applied as limitations to the use of the equity method. ##### [323-10-25-2A](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-2A) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:6ab6c4376109b245ea3cbe2df7a8dbde8a8f632c2b403c4ab6f0f2857b10c121 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an equity method investment agreement involves a contingent consideration arrangement in which the fair value of the investor's share of the investee's net assets exceeds the investor's initial cost, a liability shall be recognized. #### Share-Based Compensation Granted to Employees and Nonemployees of an Equity Method Investee ##### [323-10-25-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:44b335dfb2efe1dd430806080c52c1cc88b3f0f65fd17164113b733efdd622c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [323-10-25-4 through 25-6](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-4) provide guidance on accounting for share-based payment awards granted by an investor to employees or nonemployees of an equity method investee that provide goods or services to the investee that are used or consumed in the investee's operations when no proportionate funding by the other investors occurs and the investor does not receive any increase in the investor's relative ownership percentage of the investee. That guidance assumes that the investor's grant of share-based payment awards to employees or nonemployees of the equity method investee was not agreed to in connection with the investor's acquisition of an interest in the investee. That guidance applies to share-based payment awards granted to employees or nonemployees of an investee by an investor based on that investor's stock (that is, stock of the investor or other equity instruments indexed to, and potentially settled in, stock of the investor). ##### [323-10-25-4](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:31070c7d5bb6e74f8825db11a222edcf09b8cca93347caf53f7b64a527fb1b2f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances described in paragraph [323-10-25-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-3), a contributing investor shall expense the cost of share-based payment awards granted to employees and nonemployees of an equity method investee as incurred (that is, in the same period the costs are recognized by the investee) to the extent that the investor's claim on the investee's book value has not been increased. ##### [323-10-25-5](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:387e567347c454e34239e27f705c88954cd910ed80f91e82dc3d794c91cfef8b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances described in paragraph [323-10-25-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-3), other equity method investors in an investee (that is, noncontributing investors) shall recognize income equal to the amount that their interest in the investee's net book value has increased (that is, their percentage share of the contributed capital recognized by the investee) as a result of the disproportionate funding of the compensation costs. Further, those other equity method investors shall recognize their percentage share of earnings or losses in the investee (inclusive of any expense recognized by the investee for the share-based compensation funded on its behalf). ##### [323-10-25-6](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:c9e704cfe850a968fdfd574b550c817724ccd7b0f2f4203b9f06a96e314a88e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 2 (see paragraph [323-10-55-19](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-19)) illustrates the application of this guidance for share-based compensation granted to employees of an equity method investee. #### Retention of Industry-Specific Accounting ##### [323-10-25-7](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:00.205Z to 2026-09-09T23:40:00.205Z Record version: sha256:600cb36312dc54ddba6153b92a874750bcb23a6b59598e0eeccbc2d90592d12f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purposes of applying the equity method of accounting to an investee subject to guidance in an industry-specific Topic, an entity shall retain the industry-specific guidance applied by that investee.