ASC 325-905
Agriculture
325 Investments—Other
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ASC 325-905 governs how agricultural cooperatives account for investments in other cooperatives and how patrons (members) account for their investments in a cooperative. The core rule is that these nonmarketable long-term investments are carried at cost — including allocated equities and per-unit retains recorded at face value — rather than as equity securities, with the equity method of ASC 323-10 applied only in the infrequent case where the investor's share of the investee cooperative's unallocated retained earnings is material. Carrying amounts must be written down when the patron cannot recover full carrying value, and undistributed retains are classified as noncurrent.
Key points (7)
- Investments in cooperatives are not equity securities, are usually nonmarketable and non-transferable except back to the issuing cooperative, and are made to obtain a source of supply or marketing services rather than a return on investment (325-905-05-4).
- Long-term nonmarketable investments in agricultural cooperatives are carried at cost if not impaired; ASC 323-10's equity method applies when the investor has significant influence (325-905-25-1).
- Where a cooperative allocates all earnings to patrons and has no unallocated earnings on a book basis, ASC 323-10 does not apply; the equity method is used only when the investor's share of unallocated retained earnings is material, applied with consideration of the cooperative's voting rules or statutory rights (325-905-25-2).
- Cost means the amount of any cash investment plus the face amount of all written notices of allocation — per-unit retains, capital equity credits, revolving fund certificates, and certificates of equity (325-905-30-1); patrons record per-unit retains at face value (325-905-30-3).
- The carrying amount must be reduced if the patron cannot recover full carrying value; at a minimum the excess of the investee's unallocated losses over unallocated equities is recognized based on the patron's proportionate share of total equity, unless full recovery is demonstrated to be probable (325-905-35-1).
- Recoverability factors include whether losses were identifiable, isolated and nonrecurring; the investee's long-term profitability history; and whether the investor has ceased or will cease patronizing the cooperative (325-905-35-2).
- Retains not to be redeemed in the current year are classified as noncurrent (325-905-45-1), and a patron economically dependent on a cooperative for sale of all or a significant portion of annual production must disclose the extent of those transactions (325-905-50-1).
For students. The trap is assuming that a patron's sizable stake in a cooperative triggers the equity method — it usually does not, because voting is one-member-one-vote and earnings are fully allocated to patrons, so cost (including retains at face value) is the default. Watch the impairment trigger: unallocated losses exceeding unallocated equities force a write-down unless full recovery is probable.
agricultural cooperativepatronper-unit retainsallocated equitiesnotices of allocationcost methodunallocated losseseconomic dependency disclosure
Machine-generated study aid for ASC 325-905. Check the source paragraphs below.
325-905-00Status
Source downloaded: .Record version a3534896fe7f. Effective date must be checked in the source.
325-905-00-1
The following table identifies the changes made to this Subtopic.
| Paragraph | Action | Accounting Standards Update | Date |
| Agricultural Cooperative | Added | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Cooperatives | Superseded | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Member of an Agricultural Cooperative | Added | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Nonmember of an Agricultural Cooperative | Added | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Patrons | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Written Notice of Allocation | Added | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 | |
| 905-325-15-2 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| 905-325-15-3 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| 905-325-25-1 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| 905-325-30-1 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| 905-325-30-2 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
325-905-05Overview and Background
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325-905-05-1
This Subtopic addresses all other investments for entities in the agricultural industry. The guidance for accounting by different entities in the agricultural industry is presented in the following two Subsections:
- aCooperatives
- bCooperatives—Patrons.
Cooperatives
325-905-05-2
The Cooperatives Subsections provide guidance for an agricultural cooperative if it holds investments in other cooperatives.
Cooperatives—Patrons
325-905-05-3
The Cooperatives—Patrons Subsections provide guidance for a patron's investments in cooperatives.
325-905-05-4
Member patrons provide most of the capital required by agricultural cooperatives. The capital usually represents long-term investments acquired through initial cash investments, retains, or noncash patronage allocations. Voting rights for those investments are usually based on one-member-one-vote or limited weighted voting rather than on the number or amount of securities or other evidence of equity ownership held. The significance of investments by patrons results primarily from the purchasing or marketing rights and participation in the operating earnings. The investments are made primarily to obtain an economical source of supply or marketing services and not on the expectation of a return on investment. Investments in cooperatives are not equity securities and usually are not readily marketable, and transfer or sale, other than back to the issuing cooperative, is usually restricted or prohibited. As such, the operations of cooperatives have many of the attributes of corporate joint ventures or partnerships.
325-905-15Scope and Scope Exceptions
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Overall Guidance
325-905-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the General Subsection of Section 905-10-15.
Cooperatives
325-905-15-2
The Cooperatives Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the Cooperatives Subsection of Section 905-10-15.
Cooperatives—Patrons
325-905-15-3
The Cooperatives—Patrons Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the Cooperatives—Patrons Subsection of Section 905-10-15.
325-905-25Recognition
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Cooperatives—Patrons
325-905-25-1
Long-term investments, such as nonmarketable investments in agricultural cooperatives, shall be carried at cost if the value of the investments is not impaired. Subtopic 323-10 requires the equity method of accounting for investments in which the investor has significant influence over an investee's operating and financial policies.
325-905-25-2
When a cooperative allocates all earnings to patrons (on a tax or book basis) and there are no unallocated earnings (on a book basis), the principles set forth in Subtopic 323-10 are not applicable. In those infrequent instances when the investor's share of unallocated retained earnings of an investee cooperative is material to the investor, the equity method of accounting shall be applied in a manner that gives consideration to the voting rules or statutory rights applicable to the cooperative.
325-905-25-3
See also paragraphs concerning cooperative accounting for losses.
325-905-30Initial Measurement
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Cooperatives
325-905-30-1
Investments in other agricultural cooperatives shall be accounted for at cost, including allocated equities and retains. For this purpose, cost means the amount of any cash investment and the face amount of all written notices of allocation in the form of per-unit retains, capital equity credits, revolving fund certificates, and certificates of equity.
Cooperatives—Patrons
325-905-30-2
Investments in cooperatives shall be accounted for at cost, including allocated equities and retains.
325-905-30-3
For patrons, the retains represent investments in the cooperative. Patrons shall record the per-unit retains at face value.
325-905-35Subsequent Measurement
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Cooperatives—Patrons
325-905-35-1
The carrying amount of an investment in a cooperative shall be reduced if the patron is unable to recover the full carrying value of the investment. Losses unallocated by the investee may indicate such an inability, and, at a minimum, the excess of unallocated losses over unallocated equities shall be recognized by the patron based on the patron's proportionate share of the total equity of the investee cooperative, or any other appropriate method, unless the patron demonstrates that it is probable that the carrying amount of the investment in the cooperative can be fully recovered.
325-905-35-2
Factors to consider in making the determination include all of the following:
- aWhether the unallocated losses resulted from identifiable, isolated, and nonrecurring events
- bWhether the investee cooperative has been profitable over a long period of time and suffered only occasional losses that were offset by unallocated earnings or equities
- cWhether the investor has ceased or will cease to patronize the investee cooperative on a permanent basis or for an extended period of time.
325-905-45Other Presentation Matters
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Cooperatives—Patrons
325-905-50Disclosure
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Cooperatives—Patrons
325-905-50-1
If a patron is economically dependent on a cooperative for sale of all or a significant portion of annual production, the extent of such transactions shall be disclosed in the financial statements.