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A PDF version of this publication is attached here: Equity method of accounting guide - January 2022 (PDF 1.69mb)
PwC is pleased to offer the first edition of our Equity method investments and joint ventures guide. This guide discusses the identification of investments that are subject to the equity method of accounting guidance, and the initial and subsequent accounting for those investments. It also includes discussion of the accounting upon formation of a joint venture.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
  • Business combinations and noncontrolling interests (BCG)
  • Consolidation (CG)
  • Derivatives and hedging (DH)
  • Fair value measurements (FV)
  • Financial statement presentation (FSP)
  • Financing transactions (FG)
  • Foreign currency (FX)
  • Income taxes (TX)
  • Loans and investments (LI)
  • Property, plant, equipment and other assets (PPE)
  • Stock-based compensation (SC)

Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in January 2022
Chapter 3: Initial measurement of equity method investments
  • EM 3.3.1 was updated to address the impact of ASU 2021-08 on the determination of basis differences when an investor acquires an equity method investment.
Chapter 4: Subsequent accounting for equity method investments
  • Example EM 4-3 and Example EM 4-4 were added to EM 4.2.1 to illustrate the accounting required when an investor enters into either a downstream or upstream sale of equipment under ASC 610-20 with its equity method investee.

Revisions made in October 2021
Chapter 3: Initial measurement of equity method investments
  • EM 3.2.5 was added to address the initial measurement of an equity method investment that was previously subject to ASC 321 as a result of a purchase agreement.
This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.

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