ASC

ASC 325-940

Financial Services—Brokers and Dealers

325 Investments—Other

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In brief

IntermediateInitial measurementSubsequent measurementFair valueIndustry-specific

This subtopic tells broker-dealers in securities how to account for equity investments or financing they provide to another entity as part of a financial-restructuring transaction, including investments made through a "bridge entity" formed to pool funds from several sources. Such investments (and related receivables and debt and equity securities) are measured initially at fair value (325-940-30-1) and subsequently at fair value (325-940-35-1). Consolidation of majority-owned investees is addressed by the broker-dealer consolidation guidance in 940-810-45-1.

Key points (6)
  • The subtopic applies to broker-dealers in securities that make equity investments in, or provide financing to, another entity in connection with financial-restructuring transactions (325-940-05-1).
  • Investments may be direct or made through a 'bridge entity' organized to accumulate funds from several sources sufficient to make the investment (325-940-05-1).
  • Scope follows the broker-dealer Overall Subtopic (940-10-15), and receivables and investments in debt and equity securities that are part of a financial-restructuring transaction fall under this guidance (325-940-15-1; 325-940-15-2).
  • Initial measurement of such equity or financing investments is at fair value (325-940-30-1).
  • Subsequent measurement of such investments is also at fair value—no cost or amortized-cost model applies (325-940-35-1).
  • For majority-owned investee entities, consolidation guidance is found at 940-810-45-1 (325-940-45-1).

For students. The takeaway is simple but easy to miss: broker-dealer bridge investments in restructurings are carried at fair value both at inception and thereafter, unlike ordinary equity-method or cost-basis investments. A common misunderstanding is assuming a bridge loan is a receivable carried at amortized cost—here, if it is part of the financial-restructuring transaction, fair value governs, and majority ownership can still trigger consolidation under 940-810.

broker-dealers in securitiesfinancial-restructuring transactionbridge entityfair value measurementequity investmentbridge financingmajority-owned investeedebt and equity securities

Machine-generated study aid for ASC 325-940. Check the source paragraphs below.

325-940-05Overview and Background

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325-940-05-1
This Subtopic addresses financial-restructuring transactions by brokers and dealers in securities (broker-dealers). Specifically, a broker-dealer may make investments in the form of equity or provide financing to another entity in connection with financial-restructuring transactions. These investments may take many forms, including a direct investment or an investment in an entity (sometimes referred to as a bridge entity) that is established for the purpose of accumulating funds from several sources sufficient to make the investment.

325-940-15Scope and Scope Exceptions

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Overall Guidance

325-940-15-1
This Subtopic follows the same Scope and Scope exceptions as outlined in the Overall Subtopic (see Section 940-10-15) with specific qualifications noted below.

Other Considerations

325-940-15-2
Receivables and investments in debt and equity securities that are part of a financial-restructuring transaction (as described in paragraphs 940-325-05-1, 940-325-30-1 and 940-325-35-1) are subject to the related guidance in this Subtopic.

325-940-30Initial Measurement

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Financial-Restructuring Transactions

325-940-30-1
Investments in the form of equity or financing provided to another entity in connection with financial-restructuring transactions shall be measured initially at fair value.

325-940-35Subsequent Measurement

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Financial-Restructuring Transactions

325-940-35-1
Investments in the form of equity or financing provided to another entity in connection with financial-restructuring transactions shall be measured subsequently at fair value.

325-940-45Other Presentation Matters

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325-940-45-1
For guidance on consolidation of majority-owned investee entities, see paragraph 940-810-45-1.

325-940-S00StatusSEC

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325-940-S00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
940-325-S35-1AddedAccounting Standards Update No. 2009-1009/18/2009
940-325-S99-1AddedAccounting Standards Update No. 2009-1009/18/2009

325-940-S35Subsequent MeasurementSEC

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Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management

325-940-S35-1
See paragraph 940-325-S99-1, SEC Observer Comment: Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management, for SEC Staff views on accounting for nonderivative energy trading contracts for brokers and dealers.

325-940-S99SEC MaterialsSEC

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SEC Staff Guidance

325-940-S99-1
The guidance prohibiting mark-to-market accounting for nonderivative energy trading contracts (see paragraph 932-330-35-1) is equally applicable to brokers and dealers, as the Guide for brokers and dealers in securities does not afford brokers and dealers special treatment in that regard.

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