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Investments in limited partnerships and similar entities (e.g., a limited liability company that maintains a specific ownership account for each investor) should generally be accounted for under the equity method of accounting unless the investment is so minor that the limited partner has virtually no influence over the partnership’s operating and financial policies. In practice, investments exceeding 3 to 5% are viewed as more than minor. This threshold is different than the level applied for an investment in a corporation (see EM 2.1.1).

Excerpt from ASC 323-30-S99-1

The SEC staff’s position on the application of the equity method to investments in limited partnerships is that investments in all limited partnerships should be accounted for pursuant to paragraph 970-323-25-6. That guidance requires the use of the equity method unless the investor’s interest “is so minor that the limited partner may have virtually no influence over partnership operating and financial policies.” The SEC staff understands that practice generally has viewed investments of more than 3 to 5 percent to be more than minor.

The use of the equity method may be applied in situations when an investor has a less than 3% investment in an entity that maintains separate ownership accounts for each investor based on facts and circumstances.
Investments in a limited liability company that does not maintain specific ownership accounts for each investor (see EM 1.3.3) should be assessed under the guidance discussed in EM 2.1.1 for common stock and in-substance common stock.
A general partnership interest should be accounted for under the equity method of accounting unless the investor has a controlling financial interest and is required to consolidate.
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