Adjust Cost for an Impairment for an Equity Method Position

Owned by Nancy Cohn (Deactivated)
Last updated: Jul 18, 2023
2 min read

In the Adjust Equity Method Position panel, you can process an impairment for a single position that uses the equity method of accounting to write off investments based on an amount. You can impair a position for a common stock or Joint Venture/Limited Liability/Partnership security. You must enter a separate impairment transaction for each accounting basis where you want to impair the position. 

The Adjust Equity Method Position panel differs from the Impairments panel that you use to process impairments for positions that do not use the equity method of accounting. If any accounting basis for a position uses the equity method of accounting, you must use the Adjust Equity Method Position panel to process an impairment for the position. 

This article assumes you are familiar with the entity and security level elections that have been made for processing a common stock or Joint Venture/Limited Liability/Partnership security when you use the equity method of accounting.

To process an impairment for a position that uses the equity method of accounting:

  1. In Accounting Center, in the left navigation pane, click Transactions > Equity Method > Adjust Equity Method Position.
    You see the Adjust Equity Method Position panel.

  2. Under Entity Information, select the entity and accounting basis where you are impairing the position. 
    You must select an entity that has at least one accounting basis with an EMA Treatment of Other or STAT assigned.

  3. Under Issue Information, select the security associated with the position you are impairing.

  4. Under Accounting Information, enter the effective date, accounting date, and settlement date for the impairment.

  5. Under Adjustment Information, click Adjustment Type and select Impairment.

  6. Click the Impairment Amount Local box and specify the amount of the adjustment

  7. Complete the remaining options on the Adjust Equity Method Position panel.
    You can define the FX Rate to set the base amount for foreign securities.

  8. Click Submit.
    The system books an adjustment with an EMAADJUST event and a reason code of EMAIMPAIR. The system books the impairment at the position level and allocates it pro-rata across all open lots based on lot quantity / position quantity as of the trade date of the adjustment.

  9. The transaction has an off-setting account of Realized Loss - Impairment.