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The financial statements of an investee may not be available for the investor to apply the equity method as of the current reporting date. For example, the investor and investee may both have a reporting period ending on March 31, but the investor might not receive the investee’s financial statements for several months. The investor can make an accounting policy election to record its share of the earnings or losses of the investee using a lag period of one to three months. The lag should be applied consistently from period to period.
The decision to record an investee’s results on a lag can be made on an investment-by-investment basis. Therefore, each investment should be assessed separately to determine if a lag in investee reporting is necessary.
While ASC 323 does not specify a limit on the extent of the lag period, the provisions relating to consolidation of subsidiaries with different fiscal year ends than its parent entities offer a reasonable guideline (i.e., three months).

ASC 810-10-45-12

It ordinarily is feasible for the subsidiary to prepare, for consolidation purposes, financial statements for a period that corresponds with or closely approaches the fiscal period of the parent. However, if the difference is not more than about three months, it usually is acceptable to use, for consolidation purposes, the subsidiary’s financial statements for its fiscal period; if this is done, recognition should be given by disclosure or otherwise to the effect of intervening events that materially affect the financial position or results of operations.

When results of the investee are reported on a lag, the investee results should be for the same length of time as what is included in the investor’s financial statements. For example, for an investor’s annual financial statements, the investee’s results for 12 months should be included, although the results are for a different 12 months than those of the investor’s standalone results. Including the investee’s results for a period greater or less than 12 months in the investor’s annual financial statements is generally not appropriate. A time lag in reporting should be consistent from period to period. See EM 4.4.1 for information regarding the investor’s accounting for a new investment that is reported on a lag.
The investor should consider the effect of any known events occurring during the lag period that materially affect the financial position or results of operations of the investee if those events are also material to the financial position or results of operations of the investor.
An investor may elect to either (1) disclose or (2) disclose and record adjustments for material events occurring during the intervening period. This policy should be applied on a consistent basis from one period to the next. Often reporting entities choose disclosure only for material intervening events as it may be challenging to determine a threshold for when to adjust for intervening events. The investor would also need to track adjustments to ensure it does not record its share of intervening events in subsequent periods.
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