2.1 Introduction
An SEC registrant that has an equity method investee must consider
whether financial information about the investee should be provided in any reports
filed with the SEC that include the registrant’s financial statements. If an equity
method investee is considered significant to a registrant, the registrant may be
required to provide separate financial statements of the investee, summarized
financial information of the investee in the footnotes to its financial statements,
or both in certain filings with the SEC. Such filings may include periodic reports,
registration statements, and proxy statements.
Changing Lanes
In March 2023, the FASB issued ASU
2023-02, which updates the guidance in ASC 323-740. The
ASU expands the applicability of the PAM to investments that would otherwise
be accounted for under the equity method of accounting but that meet certain
scope considerations in ASC 323-740-25-1. When PAM is elected, the initial
investment is amortized in proportion to the income tax credits and other
income tax benefits allocated to the investor. See Appendix D of Deloitte’s Roadmap Equity Method Investments and Joint
Ventures for discussions of PAM and ASU 2023-02.
At the June 2023 CAQ SEC
Regulations Committee joint meeting with the SEC staff, the staff discussed
whether investments for which registrants elect to apply PAM would be
subject to Rules 3-09, 4-08(g), 8-03(b)(3), and 10-01(b)(1). The staff did not provide further guidance or
interpretation. Registrants that have material investments and have elected
the accounting policy choice to apply PAM may consider consulting with their
audit and legal professionals and reaching out to the SEC to discuss their
fact patterns.