The Equity Method of Accounting allows you to:
- Record your proportional share of income or loss from estimated or actual financial statements for your investment. Therefore if the total profit or loss from your investment in a partnership was $100,000 and you have an ownership interest of 10%, you can report your proportional share of income of $10,000.
- Record both return of capital and/or income distributions.
- Record your proportional share of changes in capital or other comprehensive income . For example, if the partnership has unrealized gains/losses reflected on their financial statement in capital or other comprehensive income representing changes in market value for underlying investments within the partnership, you can recognize your proportionate share of these unrealized gains and losses.
- Account for investment if the financial statements for your investment are reported in foreign dollars.
About Solutions that Use the Equity Method of Accounting
You can use the Equity Method of Accounting with Eagle's core accounting and statutory accounting. That is, you can use it with Eagle's investment accounting solution and with Eagle's insurance solution.
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WRITERS NOTE: does it work with Mutual Fund accounting? |
About Accounting Bases and the Equity Method of Accounitng
You can apply the Equity Method of Accounting to any accounting basis, including STAT, GAPP, or IFRS.
When you use a STAT accounting basis with the Equity Method of Accounting, the system allows you to elect Equity Method or STAR accounting treatment. The Equity Method supports unique accounting requirements for the statutory accounting basis. The STAR accounting treatment follows core accounting treatment rather than the equity method of accounting. Under the statutory basis, your proportionate share of income is recorded as unrealized gains and losses through capital. The system recognizes income when the income is distributed.
When you use a GAAP, IFRS, or other accounting bases than STAT with the Equity Method of Accounting, the system allows you to support regulatory requirements for equity method of accounting that are different than those used in the statutory methodology. You can record your proportionate share of income as an increase to undistributed income and an increase to your cost of investment.
When you use the Equity Method, Eagle's accounting solution allows you to account for investments for Schedule BA investments under the equity method of accounting from both a U.S GAAP and Statutory perspective. The Equity Method has unique accounting entries by accounting basis, along with unique ledger accounts for separate identification of investment activity for Schedule BA investments from both an asset and income perspective.