# ASC 323-10-35: Investments—Equity Method and Joint Ventures — Overall — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/10/#35-subsequent-measurement) 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): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:f16341351dfd923060c0b8e9e79da9792e659faaf273a02b3f60543537b0fdc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-10-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/323/10/#35-subsequent-measurement) SEC content: no #### Terminology ##### [323-10-35-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:545d6d53d138bbbbf34b4501684b8444e67a8207c9d61873fb2cfc63b9c77ec1 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 or in-substance common stock). #### The Equity Method—Overall Guidance ##### [323-10-35-2](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:cc71b58f01dee9b20984294c8e1b3256b5f3c614641220b1f3fadc6031b21b31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-10-25-2](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-2) states that the equity method is not a valid substitute for consolidation. That paragraph also explains that 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. ##### [323-10-35-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:50620b77ab91fd0313a1f570603754abdf8c3c7bb63b7c04c543fbfc2c63e822 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The procedures set forth in this Subtopic shall be followed by an investor in applying the equity method of accounting to 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.") and other investees that qualify for the equity method (that is, are within the scope of this Subtopic). ##### [323-10-35-4](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:7a0e1d45feb0c8d1c9c4d30f9fc050238058061951962b5ab4d77b19603cd69b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the equity method, an investor shall recognize its share of the [earnings or losses of an investee](https://asc.understandingaccounting.org/glossary/e/#earnings-or-losses-of-an-investee "Net income (or net loss) of an investee determined in accordance with U.S. generally accepted accounting principles (GAAP).") in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. An investor shall adjust the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment and shall report the recognized earnings or losses in income. An investor's share of the earnings or losses of an investee shall be based on the shares of common stock and in-substance common stock held by that investor. (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 Section to common stock refer to both common stock and in-substance common stock.) ##### [323-10-35-5](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:9acbfc73e01335b6ab52ad126532402905a11598a8f35b286fc020b7f2f083e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the adjustment of the carrying amount shall be included in the determination of net income by the investor, and such amount shall reflect adjustments similar to those made in preparing consolidated statements including the following adjustments: 1. a Intra-entity profits and losses. Adjustments to eliminate intra-entity profits and losses. 2. b Basis differences. Adjustments to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. 3. c Investee capital transactions. Adjustments to reflect the investor's share of changes in the investee's capital. 4. d Other comprehensive income. ##### [323-10-35-6](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:3fcc40769c404735ea80cd04b78176190ce2c4ee90e7db0d87eaf62062cf37f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If financial statements of an investee are not sufficiently timely for an investor to apply the equity method currently, the investor ordinarily shall record its share of the earnings or losses of an investee from the most recent available financial statements. A lag in reporting shall be consistent from period to period. ##### [323-10-35-7](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:7ebc30fd20d130f9571dc268efe11822c51b20481f3f71ee1be337f5a1d7c3c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Intra-entity profits and losses shall be eliminated until realized by the investor or investee as if the investee were consolidated. Specifically, intra-entity profits or losses on assets still remaining with an investor or investee shall be eliminated, giving effect to any income taxes on the intra-entity transactions, except for any of the following: 1. a A transaction with an investee (including a joint venture investee) that is accounted for as a deconsolidation of a subsidiary or a derecognition of a group of assets in accordance with paragraphs [810-10-40-3A through 40-5](https://asc.understandingaccounting.org/asc/810/10/#810-10-40-3A) 2. b A transaction with an investee (including a joint venture investee) that is accounted for as a change in ownership transaction in accordance with paragraphs [810-10-45-21A through 45-24](https://asc.understandingaccounting.org/asc/810/10/#810-10-45-21A) . 3. c A transaction with an investee (including a joint venture investee) that is accounted for as the derecognition of an asset in accordance with Subtopic 610-20 on gains and losses from the derecognition of nonfinancial assets. ##### [323-10-35-8](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:351b330f914183d61ca0b5e61e942f2c75a0d10366bcbf982e5223eff753d887 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the equity method is a one-line consolidation, the details reported in the investor's financial statements under the equity method will not be the same as would be reported in consolidated financial statements under Subtopic 810-10. All intra-entity transactions are eliminated in consolidation under that Subtopic, but under the equity method, intra-entity profits or losses are normally eliminated only on assets still remaining on the books of an investor or an investee. ##### [323-10-35-9](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:8133b497ffff8f355918cf08f33e03694f5bd2a19edffbd250ee2bb401f38a3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [810-10-45-18](https://asc.understandingaccounting.org/asc/810/10/#810-10-45-18) provides for complete elimination of intra-entity income or losses in consolidation and states that the elimination of intra-entity income or loss may be allocated between the [parent](https://asc.understandingaccounting.org/glossary/p/#parent "An entity that has a controlling financial interest in one or more subsidiaries. (Also, an entity that is the primary beneficiary of a variable interest entity.)") and the [noncontrolling interests](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest."). Whether all or a proportionate part of the intra-entity income or loss shall be eliminated under the equity method depends largely on the relationship between the investor and investee. ##### [323-10-35-10](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:9bc54e6d93a8a2b0d034817e0ca97e1f26408f95fe988d1beaa886c8ed99ea16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an investor controls an investee through majority voting interest and enters into a transaction with an investee that is not at arm's length, none of the intra-entity profit or loss from the transaction shall be recognized in income by the investor until it has been realized through transactions with third parties. The same treatment applies also for an investee established with the cooperation of an investor (including an investee established for the financing and operation or leasing of property sold to the investee by the investor) if control is exercised through guarantees of indebtedness, extension of credit and other special arrangements by the investor for the benefit of the investee, or because of ownership by the investor of warrants, convertible securities, and so forth issued by the investee. ##### [323-10-35-11](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:ab54e15214861cd234125af6180a90dfcbb99b353758abe4b9c5dcc9c6aa3632 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In other circumstances, it would be appropriate for the investor to eliminate intra-entity profit in relation to the investor's common stock interest in the investee. In these circumstances, the percentage of intra-entity profit to be eliminated would be the same regardless of whether the transaction is downstream (that is, a sale by the investor to the investee) or upstream (that is, a sale by the investee to the investor). ##### [323-10-35-12](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a64b4e3e79189018a25368f6d64776fb3ef6d1fe5ddcd316bf21c15c904cf2d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 3 (see paragraph [323-10-55-27](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-27)) illustrates the application of this guidance. ##### [323-10-35-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:c47a00e61268626d9f5dd2ceb7311cc78e5688e4af3d797e5d7a3ee07e4f5d31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A difference between the cost of an investment and the amount of underlying equity in net assets of an investee shall be accounted for as if the investee were a consolidated subsidiary. Paragraph [350-20-35-58](https://asc.understandingaccounting.org/asc/350/20/#350-20-35-58) requires that the portion of that difference that is recognized as goodwill not be amortized. However, if an entity within the scope of paragraph [350-20-15-4](https://asc.understandingaccounting.org/asc/350/20/#350-20-15-4)elects the accounting alternative for amortizing goodwill in Subtopic 350-20, the portion of that difference that is recognized as goodwill shall be amortized on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate. Paragraph [350-20-35-59](https://asc.understandingaccounting.org/asc/350/20/#350-20-35-59) explains that equity method goodwill shall not be reviewed for impairment in accordance with paragraph [350-20-35-58](https://asc.understandingaccounting.org/asc/350/20/#350-20-35-58). However, equity method investments shall continue to be reviewed for impairment in accordance with paragraph [323-10-35-32](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-32). ##### [323-10-35-14](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:4c570381869e0d36548c3bc728d6ae9669a066039b2ea79a3c19676dbdcfdc75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [323-10-35-34](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-34) for related guidance when an investment becomes subject to the equity method. ##### [323-10-35-14A](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-14A) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:c34bddddf23885ecb7d5e5c74c75773457c3e73b2e39bc15b24e42c4768cb674 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a contingency is resolved relating to a liability recognized in accordance with the guidance in paragraph [323-10-25-2A](https://asc.understandingaccounting.org/asc/323/10/#323-10-25-2A) and the consideration is issued or becomes issuable, any excess of the fair value of the contingent consideration issued or issuable over the amount that was recognized as a liability shall be recognized as an additional cost of the investment. If the amount initially recognized as a liability exceeds the fair value of the consideration issued or issuable, that excess shall reduce the cost of the investment. ##### [323-10-35-15](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:2079006ea6db39f4404fe5245b79cc21de7fcd1191a5d2d5edbdc4ba906721cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A transaction of an investee of a capital nature that affects the investor's share of stockholders' equity of the investee shall be accounted for on a step-by-step basis. ##### [323-10-35-15A](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-15A) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a858924774539706ab039b02a4811babf6a3d301501370bc2b25a1d9ce68020e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on a share issuance by an investee, see paragraph [323-10-40-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-40-1). ##### [323-10-35-16](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:4142cbfbdd405a053301e4de27781c39f57841d3224d5a87081c015588960840 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an investee has outstanding cumulative preferred stock, an investor shall compute its share of earnings (losses) after deducting the investee's preferred [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."), whether or not such dividends are declared. ##### [323-10-35-17](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a9add508ae5a762fccca24aff440ca4307aff67944b6d3e099f687b1411246bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Dividends received from an investee shall reduce the carrying amount of the investment. ##### [323-10-35-18](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a559168a0782ff5cbfc16e8c587dbc8ead21f7ec8838f1a325c2adc9e18cdb50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investor shall record its proportionate share of the investee's equity adjustments for other comprehensive income (unrealized gains and losses on available-for-sale securities; foreign currency items; and gains and losses, prior service costs or credits, and transition assets or obligations associated with pension and other postretirement benefits to the extent not yet recognized as components of net periodic benefit cost) as increases or decreases to the investment account with corresponding adjustments in equity. See paragraph [323-10-35-37](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-37) for related guidance to be applied upon discontinuation of the equity method. #### Equity Method Losses ##### [323-10-35-19](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:61b923118af239590e7bec05b99312c5783fe711bf82a79ae4a9968f3eb1cafd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investor's share of losses of an investee may equal or exceed the carrying amount of an investment accounted for by the equity method plus advances made by the investor. An equity method investor shall continue to report losses up to the investor's investment carrying amount, including any additional financial support made or committed to by the investor. Additional financial support made or committed to by the investor may take the form of any of the following: 1. a Capital contributions to the investee 2. b Investments in additional common stock of the investee 3. c Investments in preferred stock of the investee 4. d Loans to the investee 5. e Investments in debt securities (including mandatorily redeemable preferred stock) of the investee 6. f Advances to the investee. See paragraphs [323-10-35-24](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-24) and [323-10-35-28](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-28) for additional guidance if the investor has other investments in the investee. ##### [323-10-35-20](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:7fe0c6fbf6913fe673e06ecf54c5c8d90ab6609d29e2447268b05db2df5ffec1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. ##### [323-10-35-21](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:c12cdd970ddf8f5523a814d03ef998b7a1bfce5f5988ff4e5923d9a4b26227ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investor shall, however, provide for additional losses if the imminent return to profitable operations by an investee appears to be assured. For example, a material, nonrecurring loss of an isolated nature may reduce an investment below zero even though the underlying profitable operating pattern of an investee is unimpaired. ##### [323-10-35-22](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:4780cac3a8a43e0dded1d020337a20b6b5ef140c2285d0ab6daab713d6eb5c57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended. ##### [323-10-35-23](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:645098f54461584354f411e06c4d96f900e092e8b4766309def3b34a518e6f77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the following paragraph applies to situations in which both of the following conditions exist: 1. a An investor is not required to advance additional funds to an investee. 2. b Previous losses have reduced the common stock investment account to zero. ##### [323-10-35-24](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:6c588b1de333789051fed17bbee1a45be9abfe83a4a7ac918288f57460004f23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances described in paragraph [323-10-35-23](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-23), the investor shall continue to report its share of equity method losses in its statement of operations to the extent of and as an adjustment to the adjusted basis of the other investments in the investee. The order in which those equity method losses should be applied to the other investments shall follow the seniority of the other investments (that is, priority in liquidation). For each period, the adjusted basis of the other investments shall be adjusted for the equity method losses, then the investor shall apply Subtopic 310-10, 320-10, 321-10, 326-20, or 326-30 to the other investments, as applicable. ##### [323-10-35-25](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:50043bf3f51a4e42945edbe80c421aba10bb684b250fdfedc0df85853f37e3bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cost basis of the other investments is the original cost of those investments adjusted for the effects of write-downs, unrealized holding gains and losses on debt securities classified as trading in accordance with Subtopic 320-10 or equity securities accounted for in accordance with Subtopic 321-10 and amortization of any discount or premium on debt securities or financing receivables. The adjusted basis is the cost basis adjusted for the allowance for credit losses account recorded in accordance with Topic 326 on measurement of credit losses for an investee financing receivable and debt security and the cumulative equity method losses applied to the other investments. Equity method income subsequently recorded shall be applied to the adjusted basis of the other investments in reverse order of the application of the equity method losses (that is, equity method income is applied to the more senior investments first). ##### [323-10-35-26](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:3253b45b091276ebdf8a570927853adbb817db366444f70d6c30bf3d70416aef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the investor has other investments in the investee (including, but not limited to, preferred stock, debt securities, and loans to the investee) that are within the scope of Subtopic 310-10, 320-10, or 321-10, the investor should perform all of the following steps to determine the amount of equity method loss to report at the end of a period: 1. a Apply this Subtopic to determine the maximum amount of equity method losses. 2. b Determine whether the adjusted basis of the other investment(s) in the investee is positive, and do the following: 1. 1 If the adjusted basis is positive, the adjusted basis of the other investments shall be adjusted for the amount of the equity method loss based on the investments' seniority. Paragraph [320-10-35-3](https://asc.understandingaccounting.org/asc/320/10/#320-10-35-3) explains that, for investments accounted for in accordance with Subtopic 320-10, this adjusted basis becomes the debt security's basis from which subsequent changes in fair value are measured. Paragraph [321-10-35-5](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-5) explains that for investments accounted for in accordance with Subtopic 321-10, this adjusted basis becomes the equity security's basis from which subsequent changes in fair value are measured. 2. 2 If the adjusted basis reaches zero, equity method losses shall cease being reported; however, the investor shall continue to track the amount of unreported equity method losses for purposes of applying paragraph [323-10-35-20](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-20). If one of the other investments is sold at a time when its carrying value exceeds its adjusted basis, the difference between the cost basis of that other investment and its adjusted basis at the time of sale represents equity method losses that were originally applied to that other investment but effectively reversed upon its sale. Accordingly, that excess represents unreported equity method losses that shall continue to be tracked before future equity method income can be reported. Example 4 (see paragraph [323-10-55-30](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-30)) illustrates the application of (b)(2). 3. c After applying this Subtopic, apply Subtopics 310-10, 320-10, 321-10, 326-20, and 326-30 to the adjusted basis of the other investments in the investee, as applicable. 4. d Apply appropriate generally accepted accounting principles (GAAP) to other investments that are not within the scope of Subtopic 310-10, 320-10, 321-10, 326-20, or 326-30. Example 4 (see paragraph [323-10-55-30](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-30)) illustrates the application of this guidance. ##### [323-10-35-27](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:59fd62f52838927d66c7318b8aabd69db853023059a73e79607ae967bfa53b0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the following paragraph applies if all of the following conditions exist: 1. a An investor owns common stock (or in-substance common stock) and other investments in an investee. 2. b The investor has the ability to exercise significant influence over the operating and financial policies of the investee. 3. c The investor is not required to advance additional funds to the investee. 4. d Previous losses have reduced the common stock investment account to zero. ##### [323-10-35-28](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:5896a36cbe7386ee42359de1af3b1f147be8184e4eac9d737a88af6e47975106 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances described in the preceding paragraph, the investor shall not recognize equity method losses based solely on the percentage of investee common stock held by the investor. Example 5 (see paragraph [323-10-55-48](https://asc.understandingaccounting.org/asc/323/10/#323-10-55-48)) illustrates two possible approaches for recognizing equity method losses in such circumstances. ##### [323-10-35-29](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:4f33eff020f0421802062ccf710bcb04a0c2f73543b2cd781450caa1d2008556 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a subsequent investment in an investee does not result in the ownership interest increasing from one of significant influence to one of control and, in whole or in part, represents, in substance, the funding of prior losses, the investor should recognize previously suspended losses only up to the amount of the additional investment determined to represent the funding of prior losses (see (b)). Whether the investment represents the funding of prior losses, however, depends on the facts and circumstances. Judgment is required in determining whether prior losses are being funded and all available information should be considered in performing the related analysis. All of the following factors shall be considered; however, no one factor shall be considered presumptive or determinative: 1. a Whether the additional investment is acquired from a third party or directly from the investee. If the additional investment is purchased from a third party and the investee does not obtain additional funds either from the investor or the third party, it is unlikely that, in the absence of other factors, prior losses are being funded. 2. b The fair value of the consideration received in relation to the value of the consideration paid for the additional investment. For example, if the fair value of the consideration received is less than the fair value of the consideration paid, it may indicate that prior losses are being funded to the extent that there is disparity in the value of the exchange. 3. c Whether the additional investment results in an increase in ownership percentage of the investee. If the investment is made directly with the investee, the investor shall consider the form of the investment and whether other investors are making simultaneous investments proportionate to their interests. Investments made without a corresponding increase in ownership or other interests, or a pro rata equity investment made by all existing investors, may indicate that prior losses are being funded. 4. d The seniority of the additional investment relative to existing equity of the investee. An investment in an instrument that is subordinate to other equity of the investee may indicate that prior losses are being funded. ##### [323-10-35-30](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:aeaa69ceee0baf8df20648bdd27945ec2f719fba878f7055d7814c1e7e034626 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon making the additional investment, the investor should evaluate whether it has become otherwise committed to provide financial support to the investee. #### Decrease in Investment Value ##### [323-10-35-31](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a9ebf88a1dadebdf5f02a0268debdd6bdbef19142fe12568ca59d635d515c59b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. ##### [323-10-35-32](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:8d35d283afe10fb4008653f553a398f77866efdac4f73212001d603dd9deea68 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. However, a decline in the quoted market price below the carrying amount or the existence of operating losses is not necessarily indicative of a loss in value that is other than temporary. All are factors that shall be evaluated. ##### [323-10-35-32A](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-32A) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:92e325ae3a574dbb39da4f4061af547232132e5d5e2f07ecd94906889898de9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An equity method investor shall not separately test an investee's underlying asset(s) for impairment. However, an equity investor shall recognize its share of any impairment charge recorded by an investee in accordance with the guidance in paragraphs [323-10-35-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-13) and [323-10-45-1](https://asc.understandingaccounting.org/asc/323/10/#323-10-45-1) and consider the effect, if any, of the impairment on the investor's basis difference in the assets giving rise to the investee's impairment charge. #### Change in Level of Ownership or Degree of Influence ##### [323-10-35-33](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:50709d8ce9e3e006177b21d7bb6fedea19772c24fcc798c0abbcff869d859a3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-10-15-12](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-12) explains that 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 by an increase in the level of ownership described in paragraph [323-10-15-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-3) (that is, acquisition of additional voting stock by the investor, acquisition or retirement of voting stock by the investee, or other transactions). If an investment qualifies for use of the equity method (that is, falls within the scope of this Subtopic), the investor shall add the cost of acquiring the additional interest in the investee (if any) to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The current basis of the investor's previously held interest in the investee shall be remeasured in accordance with paragraph [321-10-35-1](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-1) or [321-10-35-2](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-2), as applicable, immediately before adopting the equity method of accounting. For purposes of applying paragraph [321-10-35-2](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-2) to the investor's previously held interest, if the investor identifies observable price changes in orderly transactions for an identical or a similar investment of the same issuer that results in it applying Topic 323, the entity shall remeasure its previously held interest at fair value immediately before applying Topic 323. ##### [323-10-35-34](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:572c15f1f520b144460a751f0e7b924fa59617013a5fb6df508577d384b91533 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The carrying amount of an investment in common stock of an investee that qualifies for the equity method of accounting as described in paragraph [323-10-15-12](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-12) may differ from the underlying equity in net assets of the investee. The difference shall affect the determination of the amount of the investor's share of earnings or losses of an investee as if the investee were a consolidated subsidiary. However, if the investor is unable to relate the difference to specific accounts of the investee, the difference shall be recognized as goodwill and not be amortized in accordance with Topic 350. ##### [323-10-35-35](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:09310400ea11c80b19b9bca2e86670353bfe8a42edd96bd0c56c57afeb1cbe98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Sales of stock of an investee by an investor shall be accounted for as gains or losses equal to the difference at the time of sale between selling price and carrying amount of the stock sold. ##### [323-10-35-36](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:a46020527d947f3f50bc56676ad7bc5055c248ab4443e675463b8115399c2515 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investment in voting stock of an investee may fall below the level of ownership described in paragraph [323-10-15-3](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-3) from sale of a portion of an investment by the investor, sale of additional stock by an investee, or other transactions and the investor may thereby lose the ability to influence policy, as described in that paragraph. An investor shall discontinue accruing its share of the earnings or losses of the investee for an investment that no longer qualifies for the equity method. The earnings or losses that relate to the stock retained by the investor and that were previously accrued shall remain as a part of the carrying amount of the investment. The investment account shall not be adjusted retroactively under the conditions described in this paragraph. Upon the discontinuance of the equity method, an investor shall remeasure the retained investment in accordance with paragraph [321-10-35-1](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-1) or [321-10-35-2](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-2), as applicable. For purposes of applying paragraph [321-10-35-2](https://asc.understandingaccounting.org/asc/321/10/#321-10-35-2) to the investor's retained investment, if the investor identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer that results in it discontinuing the equity method, the entity shall remeasure its retained investment at fair value immediately after discontinuing the equity method. Topic 321 also addresses the subsequent accounting for investments in equity securities that are not consolidated or accounted for under the equity method. ##### [323-10-35-37](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:2f62f910dc60ef9955bb205d8dedfeecea851cddbaa51bdf1d569d3e8082d08e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-10-35-39](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-39) provides guidance on how an investor shall account for its proportionate share of an investee's equity adjustments for other comprehensive income in all of the following circumstances: 1. a A loss of significant influence 2. b A loss of control that results in accounting for the investment in accordance with Topic 321 3. c Discontinuation of the equity method for an investment in a limited partnership because the conditions in paragraph [970-323-25-6](https://asc.understandingaccounting.org/asc/323/970/#323-970-25-6) are met for accounting for the investment in accordance with Topic 321. ##### [323-10-35-38](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:969fc7821fea35bef185b6868551f5f2dd9c134e059f97b60b3ac0f4a69fe7f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-10-35-39](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-39) does not provide guidance for entities that historically have not recorded their proportionate share of an investee's equity adjustments for other comprehensive income. That paragraph does not provide guidance on the measurement and recognition of a gain or loss on the sale of all or a portion of the underlying investment. ##### [323-10-35-39](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:40:05.397Z to 2026-09-09T23:40:05.397Z Record version: sha256:4a69760445bc0ed38fe850deb52a95a740a61d7453e75a5d5ebc75903f7f2315 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances described in paragraph [323-10-35-37](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-37), an investor's proportionate share of an investee's equity adjustments for other comprehensive income shall be offset against the carrying value of the investment at the time significant influence is lost. To the extent that the offset results in a carrying value of the investment that is less than zero, an investor shall both: 1. a Reduce the carrying value of the investment to zero 2. b Record the remaining balance in income.