ASC 323-946

Financial Services—Investment Companies

323 Investments—Equity Method and Joint Ventures

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In brief

IntermediateSubsequent measurement Fair value Industry-specific Financial instruments

This subtopic tells investment companies how (and whether) to apply the equity method of Topic 323. The general rule is that an investment company does not use the equity method for its noncontrolling ownership interests; instead it measures those investments at fair value under Subtopic 946-320. The one exception is an investment in an operating entity that provides services to the investment company (e.g., an investment adviser or transfer agent), which is accounted for under the equity method if it otherwise qualifies.

Key points (5)

This Subtopic addresses application of the Topic 323 equity method by an investment company (323-946-05-1) and follows the scope of Section 946-10-15 (323-946-15-1).
Use of the equity method by an investment company generally is not appropriate; noncontrolling ownership interests are measured under Subtopic 946-320, which requires debt and equity securities to be subsequently measured at fair value (323-946-45-1).
Exception: if the investment is in an operating entity that provides services to the investment company (for example, an investment adviser or transfer agent, see 946-10-55-5), the purpose is to obtain services rather than realize a gain on sale (323-946-45-2).
For such a service-providing operating entity, a noncontrolling interest that otherwise qualifies for the equity method must be accounted for under the equity method rather than at fair value (323-946-45-2).
Most of the former guidance in this subtopic (paragraphs 45-3 through 45-18, 50-1 through 50-4, and 55-1 through 55-9) was superseded by ASU 2013-08.

For students. The takeaway is a flip of the normal Topic 323 default: significant influence does not trigger the equity method for an investment company, because fair value measurement is the industry's overriding measurement principle. The common mistake is missing the narrow exception for investments in service providers (adviser, transfer agent), where the equity method is required, not optional.

investment company equity method fair value measurement noncontrolling ownership interest operating entity providing services investment adviser transfer agent

Machine-generated study aid for ASC 323-946. Check the source paragraphs below.

323-946-00Status

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323-946-00-1

The following table identifies the changes made to this Subtopic.

Paragraph	Action	Accounting Standards Update	Date

Investment Company	Superseded	Accounting Standards Update No. 2013-08	06/07/2013
Related Parties	Superseded	Accounting Standards Update No. 2013-08	06/07/2013
Underlying	Superseded	Accounting Standards Update No. 2013-08	06/07/2013

946-323-05-1	Amended	Accounting Standards Update No. 2013-08	06/07/2013
946-323-15-1	Amended	Accounting Standards Update No. 2013-08	06/07/2013
946-323-15-2	Superseded	Accounting Standards Update No. 2013-08	06/07/2013
946-323-45-1	Amended	Accounting Standards Update No. 2013-08	06/07/2013
946-323-45-2	Amended	Accounting Standards Update No. 2013-08	06/07/2013
946-323-45-3 through 45-18	Superseded	Accounting Standards Update No. 2013-08	06/07/2013
946-323-50-1 through 50-4	Superseded	Accounting Standards Update No. 2013-08	06/07/2013
946-323-55-1 through 55-9	Superseded	Accounting Standards Update No. 2013-08	06/07/2013

323-946-05Overview and Background

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323-946-05-1

This Subtopic provides guidance on the application of the equity method of accounting in Topic 323 by an investment company.

323-946-15Scope and Scope Exceptions

Source downloaded: 2026-09-09T23:42:17.010Z.Record version 715bfaf1fef8. Effective date must be checked in the source.

Overall Guidance

323-946-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 946-10-15.

323-946-15-2

Paragraph superseded by Accounting Standards Update No. 2013-08.

323-946-45Other Presentation Matters

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Application of the Equity Method

323-946-45-1

Except as discussed in the following paragraph, use of the equity method of accounting by an investment company is not appropriate. Rather, those noncontrolling ownership interests held by an investment company shall be measured in accordance with guidance in Subtopic 946-320, which requires investments in debt and equity securities to be subsequently measured at fair value.

323-946-45-2

An exception to the general principle in the preceding paragraph occurs if the investment company has an investment in an operating entity that provides services to the investment company, for example, an investment adviser or transfer agent (see paragraph 946-10-55-5). In those cases, the purpose of the investment is to provide services to the investment company rather than to realize a gain on the sale of the investment. If an investment company holds a noncontrolling ownership interest in such an operating entity that otherwise qualifies for use of the equity method of accounting, the investment company should use the equity method of accounting for that investment, rather than measuring the investment at fair value.

323-946-45-3

Paragraphs 946-323-45-3 through 45-18 superseded by Accounting Standards Update No. 2013-08.