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This chapter discusses the accounting for equity interests within the scope of ASC 321, Investments – Equity Securities. ASC 321 provides guidance for equity interests that meet the definition of an equity security, as well as other equity interests (such as investments in partnerships, unincorporated joint ventures, and limited liability companies) that are required to be accounted for like equity securities under ASC 321. The definition of an equity security also includes the right to acquire an ownership interest in an entity (e.g., warrants and forward purchase contracts) or dispose of an ownership interest in an entity (e.g., put options and forward sale contracts) at fixed or determinable prices. The term “equity interest,” as used in this chapter, refers to all equity instruments within the scope of ASC 321.
Equity interests issued by consolidated subsidiaries or equity method investees are outside the scope of this guide. For information on consolidation and the equity method of accounting, see PwC’s Consolidation guide.
Other equity interests outside the scope of ASC 321 include:
● Derivative instruments that are subject to the requirements of ASC 815, including those that have been separated from a host contract. If an equity interest is in the scope of ASC 321, the host instrument remains within the scope of ASC 321 after the embedded derivative has been separated.
● An exchange membership that has the characteristics specified in ASC 940-340-25-1(b) for an ownership interest in the exchange.
● Federal Home Loan Bank and Federal Reserve Bank stock. These equity interests should be accounted for at cost and evaluated for impairment in accordance with ASC 942-325-35-1 and ASC 942-325-35-3.
See LI 2.2.3 for information on specialized industries outside the scope of ASC 321.
Information on disclosures for equity investments within the scope of ASC 321 can be found in LI 12.
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