This scenario describes income adjustments when you use the Equity Method (EMA) accounting method. When you use the equity method of accounting for a position, you can hold positions that use the Equity Method (EMA) accounting method as well as positions that use the STAR accounting method. Income adjustments only apply to EMA securities.
For these scenarios, the Entity (EMAENT) has two bases:
- STAT (uses the STAT equity method treatment)
- GAAP (uses the Other equity method treatment)
Any other bases that use the generic STAR method of accounting process the Open, Close, and Conversion transactions as they normally do in Eagle Accounting, while all of the Adjustment transactions are not available for generic STAR accounting bases.
For the Sample Joint Venture security there are two open lots of 500 units (LOT1) and 300 units (LOT2).
The current balances for the unrealized accounts follow:
- Unrealized Market gain of $1,000 ($625 allocated to LOT1, $375 to LOT2)
- Unrealized Currency loss of $500 ($312.50 allocated to LOT1, $187.50 to LOT2)
- Unrealized Income (STAT)/Undistributed Income (Other) of $1,200 ($750 allocated to LOT1, $450 allocated to LOT2)
These each display in the Adjust Equity Method Income panel.
The current financial statement reflects the following:
- Unrealized Market loss balance of $300
- Unrealized Currency loss balance of $100
- Additional Unrealized Income/Undistributed Income of $400 (a $1,600 balance)
Note that the Adjust Equity Method Income panel has a field that displays the current balance for market and currency gain/loss, but the Unrealized Income/Undistributed Income field asks only for the income during that financial period.
The system updates the two lots pro-rata to reflect the following balances (the position level stores the total balances as well):
- Unrealized Market loss. $187.50 to LOT1, $112.50 to LOT2
- Unrealized Currency loss. $62.50 to LOT1, $37.50 to LOT2
- Unrealized Income/Undistributed Income. $1,000 to LOT1, $600 to LOT2
Finally, ledger activity posts the delta between prior balance and current balance. Accounts specific to the equity method of accounting appear in yellow.
STAT Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1011000103 | UNREALIZED APPRECIATION OF UNDISTRIBUTED INCOME | 400.00 | 0.00 |
1011000101 | UNREALIZED APPRECIATION OF INVESTMENTS | 0.00 | 1,000.00 |
1011000102 | UNREALIZED DEPRECIATION OF INVESTMENTS | 0.00 | 300.00 |
3003000331 | NET UNREALIZED GAIN ALLOCATED TO CAPITAL | 1,300.00 | 0.00 |
1011000202 | UNREALIZED CURRENCY DEPRECIATION OF INVESTMENTS | 400.00 | 0.00 |
3003000334 | NET UNREALIZED CURRENCY LOSS ALLOCATED TO CAPITAL | 0.00 | 400.00 |
3003000401 | UNREALIZED INCOME/LOSS | 0.00 | 400.00 |
Other Treatment
Account | Account | Debit | Credit |
|---|---|---|---|
1010000100 | COST OF INVESTMENTS | 400.00 | 0.00 |
1011000101 | UNREALIZED APPRECIATION OF INVESTMENTS | 0.00 | 1000.00 |
1011000102 | UNREALIZED DEPRECIATION OF INVESTMENTS | 0.00 | 300.00 |
3003000331 | NET UNREALIZED GAIN ALLOCATED TO CAPITAL | 1,300.00 | 0.00 |
1011000202 | UNREALIZED CURRENCY DEPRECIATION OF INVESTMENTS | 400.00 | 0.00 |
3003000334 | NET UNREALIZED CURRENCY LOSS ALLOCATED TO CAPITAL | 0.00 | 400.00 |
4001000107 | UNDISTRIBUTED INVESTMENT INCOME | 0.00 | 400.00 |
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