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ASC 825 permits reporting entities to choose to elect the fair value option at specified election dates and measure eligible items at fair value.

Excerpt from ASC 825-10-15-4

All entities may elect the fair value option for any of the following eligible items:
  1. A recognized financial asset and financial liability…

Equity method investments are financial assets and are generally eligible for the fair value option under ASC 825-10. However, if the investor’s interest includes a significant compensatory element (e.g., a performance incentive interest embedded as part of a general partner’s equity interest) and no bifurcation of the compensatory element is required, the investor is precluded from electing the fair value option for its equity investment. For example, if an equity investment included a substantive obligation for the investor to provide services to the investee, the election of the fair value option would not be appropriate as it could result in the acceleration of revenue that should be earned when future services are provided to the investee.
An investor electing to adopt the fair value option for any of its equity method investments is required to present those equity method investments at fair value at each reporting period, with changes in fair value reported in the income statement. In addition, certain disclosures are required in the investor’s financial statements when it has elected the fair value option for an investment that otherwise would be accounted for under the equity method of accounting. See FSP 20.6.3.2 for these disclosure requirements.
An investor can generally elect the fair value option for a single eligible investment without needing to elect the fair value option for identical types of investments in other entities. That is, an instrument-by-instrument election is permitted. However, when an investor elects the fair value option for a specific investment, it must apply the fair value option to all of its eligible interests in the same entity (e.g., all tranches of equity, debt investments, guarantees).
The fair value option can be elected when an investment becomes subject to the equity method of accounting for the first time. For example, an investment may become subject to the equity method of accounting for the first time when an investor obtains significant influence by acquiring an additional investment in an investee or when an investor loses control of an investee, but retains an interest that provides it with the ability to exercise significant influence.
The election of the fair value option is irrevocable, unless an event creating a new election date occurs. Therefore, absent a qualifying event, a reporting entity that elects to adopt the fair value option to account for an equity method investment is precluded from subsequently applying the equity method of accounting to that investment. An investor that elects the fair value option and subsequently loses the ability to exercise significant influence would be required to continue to account for its retained interest on a fair value basis (i.e., the retained investment would not be eligible to be accounted for pursuant to other GAAP, such as the measurement alternative under ASC 321). See FV 5.4.2 for further information on qualifying election dates.
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