FASB Proposes Targeted Improvements to Equity Method of Accounting

The FASB has released a proposed ASU that would amend ASC 323 to (1) require entities to use a single model based on one threshold (significant influence) related to applying the equity method of accounting, irrespective of an investee’s legal form, and (2) clarify how investors should determine their share of an equity method investee’s earnings (also known as “equity in earnings”) when the investee has a complex allocation structure. The proposed ASU is intended to make the accounting for equity method investments more operable.

Comments on the proposed ASU are due by January 11, 2027. For more information, see the press release on the FASB’s Web site.