Cost Adjustment Scenario for New Partner Added
This scenario is based on a security, Sample Joint Venture, currently holding 800 units across two lots (500 units in LOT 1 and 300 units in LOT 2).
The New Partner Added transaction adjusts differently for the two basis treatment methods, with one adjusting the App/Dep accounts and the other adjusting cost. Sample Joint Venture requires an adjustment due to an additional partner, with $1,200 in cost added to the position.
The EMAADJUST transaction creates an open adjustment lot with a transaction reason (tag 56) of EMANEWPART added to the security. For the STAT treatment, the offset account is Unrealized App/Dep, while for the Other treatment it is Cost. The system adds $1,200 to any existing undistributed income on the position level and adjusts open lots proportionally.
Ledger entries follow. Accounts added to support the use of the equity method of accounting appear in yellow.
STAT Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1011000103 | UNREALIZED APPRECIATION OF UNDISTRIBUTED INCOME | 1,200.00 | 0.00 |
3003000401 | UNREALIZED INCOME/LOSS | 0.00 | 1,200.00 |
Other Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS | 1,200.00 | 0.00 |
4001000107 | UNDISTRIBUTED INVESTMENT INCOME | 0.00 | 1,200.00 |
Cost Adjustment Scenario for Impairment
This scenario is based on a security, Sample Joint Venture, currently holding 800 units across two lots (500 units in LOT 1 and 300 units in LOT 2).
In this scenario, you need to impair Sample Joint Venture by $700. Note that for both bases the Unrealized Income/Loss (STAT) and Undistributed Income (GAAP) are not affected. You can adjust those values separately using the Adjust Equity Method Income panel.
STAT Treatment and Other Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS | 0.00 | 700.00 |
4004000303 | REALIZED LOSS - IMPAIRMENT | 700.00 | 0.00 |
Cost Adjustment Scenario for Additional Investment
This scenario is based on a security, Sample Joint Venture, currently holding 800 units across two lots (500 units in LOT 1 and 300 units in LOT 2).
Options for Additional Investment include updating the Total Commitment, Units/Ownership Percentage, and/or the Cost on the position. The Commitment and Units/Ownership Percentage values flow to the position level and also update open lots pro rata. The additional Cost updates position-level and lot-level amounts, and results in a ledger entry that follows.
Current Cost for Sample Joint Venture is $1,000, with $800 allocated to LOT 1 (500 units) and $200 to LOT 2 (300 units). You are booking $400 in additional cost.
The system allocates:
- 62.5% (500/800) of the cost to LOT 1 ($250, so new current cost of $1,050)
- 37.5% (300/800) of the cost to LOT 2 ($150, so new current cost of $350)
The ledger entry processes the same for both STAT and GAAP treatment, as follows.
STAT Treatment and Other Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS | 400.00 | 0.00 |
2002000100 | INVESTMENT PAYABLE | 0.00 | 400.00 |
This transaction creates a cash payable record, settled separately.
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