ASC

ASC 325-20

Cost Method Investments

325 Investments—Other

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In brief

IntermediateFinancial instrumentsSubsequent measurementImpairmentTransition and effective dates

ASC 325-20 formerly governed the cost method of accounting for equity securities without a readily determinable fair value (cost-method investments), including their initial measurement, impairment assessment, and disclosure. Every substantive paragraph in the subtopic was superseded by ASU 2016-01, so the subtopic is now an empty shell with no operative guidance. Equity investments previously accounted for under the cost method are now within the scope of ASC 321, Investments—Equity Securities.

Key points (6)
  • All of the overview (325-20-05), scope (325-20-15), recognition (325-20-25), initial measurement (325-20-30), subsequent measurement/impairment (325-20-35), and disclosure (325-20-50) paragraphs were superseded by Accounting Standards Update No. 2016-01, leaving no effective guidance in this subtopic.
  • Because 325-20 is superseded, the cost method for equity securities without a readily determinable fair value is no longer available under U.S. GAAP.
  • Equity investments formerly covered by this subtopic are accounted for under ASC 321, generally at fair value with changes recognized in net income, subject to the measurement alternative (cost less impairment, adjusted for observable price changes).
  • Impairment of such investments is now evaluated under ASC 321's qualitative impairment model rather than the former other-than-temporary impairment analysis in 325-20-35.
  • Paragraphs 325-20-05-4, 325-20-25-3, 325-20-30-7, and 325-20-40-1 are designated 'not used,' confirming the subtopic retains only placeholder text.
  • Any pre-2016-01 reference to a 'cost-method investment' under 325-20 should be treated as superseded legacy guidance when reading older financial statements.

For students. This subtopic matters mainly as a historical marker: exam questions and older filings may reference the "cost method," but ASU 2016-01 eliminated it and moved these investments to ASC 321. The common misunderstanding is assuming cost-method accounting still exists for private-company equity holdings; the correct answer is fair value under ASC 321 or its measurement alternative.

cost method investmentsequity securities without a readily determinable fair valuesuperseded guidancemeasurement alternativeother-than-temporary impairmentlegacy gaap

Machine-generated study aid for ASC 325-20. Check the source paragraphs below.

325-20-00Status

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325-20-05Overview and Background

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325-20-15Scope and Scope Exceptions

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325-20-25Recognition

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325-20-30Initial Measurement

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325-20-35Subsequent Measurement

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325-20-40Derecognition

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325-20-50Disclosure

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325-20-60Relationships

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