{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/323/946/","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","number":"323-946","topic":"323","title":"Financial Services—Investment Companies","area":"Assets","paragraphs":10,"summary":"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.","concepts":["investment company","equity method","fair value measurement","noncontrolling ownership interest","operating entity providing services","investment adviser","transfer agent"],"categories":["Subsequent measurement","Fair value","Industry-specific","Financial instruments"],"level":"intermediate","topic_title":"Investments—Equity Method and Joint Ventures","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"323-946-00-1","para":"00-1","html":"
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Investment Company Superseded Accounting Standards Update No. 2013-08 06/07/2013
Related Parties Superseded Accounting Standards Update No. 2013-08 06/07/2013
Underlying Superseded Accounting Standards Update No. 2013-08 06/07/2013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946-323-15-2 Superseded Accounting Standards Update No. 2013-08 06/07/2013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946-323-45-3 through 45-18 Superseded Accounting Standards Update No. 2013-08 06/07/2013
946-323-50-1 through 50-4 Superseded Accounting Standards Update No. 2013-08 06/07/2013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
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This Subtopic provides guidance on the application of the equity method of accounting in Topic 323 by an investment company.
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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 946-10-15.
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Paragraph superseded by Accounting Standards Update No. 2013-08.
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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.
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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.
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Paragraphs 946-323-45-3 through 45-18 superseded by Accounting Standards Update No. 2013-08.
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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":["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."],"categories":["Subsequent measurement","Fair value","Industry-specific","Financial instruments"],"audience_level":"intermediate","student_note":"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.","related_topics":["323","946-320","946-10","946-810","820"],"key_concepts":["investment company","equity method","fair value measurement","noncontrolling ownership interest","operating entity providing services","investment adviser","transfer agent"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42682b04d112ac6280b7e1fddeab7b00774729e6c31acb9b562642b516c1673c","downloaded_from":"2026-09-09T23:42:12.104Z","last_downloaded_at":"2026-09-09T23:42:31.673Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"323-30","title":"Partnerships, Joint Ventures, and Limited Liability 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Ventures","score":0.7869,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b258fb97fb8499150211afafadca6037aa93fb9d05963c0e0a8d1aec1e44c7a1","downloaded_from":"2026-09-09T23:43:04.021Z","last_downloaded_at":"2026-09-09T23:43:16.668Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"810-946","title":"Financial Services—Investment 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