equity method investment

This Subtopic applies equity method and joint venture accounting to the oil and gas industry. Its core point is that joint interest (joint venture) operations, in which working interest owners retain an undivided interest in a jointly operated property run by a designated operator, are usually reflected by including the investor's proportional share of the revenues, expenses, and assets directly in its financial statements rather than by a one-line equity method presentation.

This Subtopic addresses when a mining entity may use proportionate consolidation — presenting its pro rata share of an investee's assets, liabilities, revenues, and expenses on a gross basis rather than as a one-line equity method investment. Proportionate consolidation is permitted only where it has been established industry practice, and for extractive activities it is limited to unincorporated legal entities whose activities are confined to the extraction of mineral resources. Entities engaged in refining, marketing, or transporting extracted minerals are not "in an extractive industry" for this purpose.

This Subtopic permits proportionate consolidation (a proportionate gross presentation of assets, liabilities, revenues, and expenses) for oil and gas ventures, an exception to the general rule that equity method investments in unincorporated entities are presented on a one-line basis. It applies only where proportionate consolidation is established industry practice, and the oil and gas industry is such an industry.

This Subtopic tells bank holding companies how to present trust-preferred securities structures. Because the sponsoring bank holds no variable interest in the special-purpose trust, it cannot be the trust's primary beneficiary and does not consolidate it (810-942-55-2). Instead, the bank reports the subordinated debentures it issued to the trust as debt on its balance sheet, and accounts for its holding of the trust's common securities under the equity method (810-942-45-1).

This Subtopic tells a time-sharing developer-seller how to account for special-purpose entities (SPEs) it establishes in connection with selling time-sharing intervals. If the SPE structure is legally required by the jurisdiction in order to sell intervals to nonresident customers and the SPE holds no assets other than the time-sharing intervals and has no debt, the SPE is viewed as lacking economic substance and existing solely to facilitate sales; the seller then reports the unsold interests in the SPE as time-sharing inventory on its balance sheet rather than applying consolidation or equity/cost method accounting. All other SPEs are evaluated under the normal consolidation, VIE, and investment models.