35-2 Under the proportional amortization method, the investor amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits allocated to the investor. The amortization amount shall be calculated as follows:
- The initial investment balance less any expected residual value of the investment, multiplied by
- The percentage of actual income tax credits and other income tax benefits allocated to the investor in the current period divided by the total estimated income tax credits and other income tax benefits expected to be received by the investor over the life of the investment.
35-5 Any expected residual value of the investment shall be excluded from the proportional amortization calculation. Non-income-tax-related benefits received from operations of the limited liability entity shall be included in pre-tax earnings when realized or realizable. Gains or losses on the sale of the investment, if any, shall be included in pre-tax earnings at the time of sale.
35-6 An investment shall be tested for impairment when events or changes in circumstances indicate that it is more likely than not that the carrying amount of the investment will not be realized. An impairment loss shall be measured as the amount by which the carrying amount of an investment exceeds its fair value. A previously recognized impairment loss shall not be reversed.
This includes (1) any unconditional and legally binding future contributions to be made and (2) the cost of any future contributions that are contingent on a future event that is determined to be probable. These deferred equity contributions should be discounted and recognized as part of the initial investment balance.
For simplicity, assume that the investment balance does not reflect any deferred equity contributions.