Adjust Cost for an Additional Investment 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 a cost adjustment for a single position that uses the equity method of accounting when there is an additional investment. You can adjust a common stock or Joint Venture/Limited Liability/Partnership security for additional investments. You must enter a separate transaction for each accounting basis you need to adjust.

For increases to both Cost and Units/Shares/Ownership Percentage, you use open transactions. For increases to just one or the other, you use Additional Investment adjustments. When you make an adjustment for an additional investment, you can update the Cost, Commitment, and/or the informational Shares/Units type Ownership Percentage values for the position. You cannot use this transaction to update the Ownership Percentage for a security with a Percentage quantity type. 

The Adjust Equity Method Position panel differs from the cost adjustment panels that you use to process 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 adjust the position for additional investments. 

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 adjust cost for an additional investment 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 adjusting 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 adjusting.

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

  5. Under Adjustment Information, click Adjustment Type and select Additional Investment.

  6. In the Local Cost Adjustment box, enter the amount of the cost increase.

  7. In the Ownership Percentage box, you can update the percentage of ownership in a partnership, joint venture, or limited liability company to use for the adjustment.
    You can update the Ownership Percentage in this panel only for a security with a Quantity Type of Shares or Units. The Ownership Percentage value is informational for those securities.

  8. In the Commitment box, you can update the amount committed by the investor in the partnership, joint venture, or limited liability corporation. 

  9. Complete the remaining options on the Adjust Equity Method Position panel.
    For foreign securities, you can define the Local to Base FX Rate value to set the base amount. 

  10. Click Submit.
    The system books an adjustment with an EMAADJUST event and a reason code of EMAADDINV. It allocates the adjustment pro-rata across all open lots based on lot quantity / position quantity as of the trade date of the adjustment. If you increased the cost, it creates a new cash payable record.

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