Audit Friendly MONTH END CLOSERS
STANDARDS TRACKER

STANDARDS TRACKER

FASB proposed ASU: targeted improvements to equity method investment accounting

 

FASB's October 28 proposal collapses the corporation-versus-partnership threshold split and adds guidance on complex allocation structures.

FASB issued a proposed ASU on October 28, 2026 to improve the operability of equity method investment accounting under ASC Topic 323. The proposal addresses two issues that stakeholders flagged during FASB's 2025 agenda consultation: inconsistent scope criteria depending on the legal form of the investee, and missing authoritative guidance for complex earnings-allocation structures in non-real estate entities. CPA Practice Advisor reports the proposal was issued October 28.

BY THE NUMBERS

See below

EFFECTIVE

1

SOURCE TRACKED

Oct 29

LAST UPDATED

FASB

ISSUER

The proposed ASU would require a single threshold - significant influence - for applying the equity method regardless of whether the investee is organized as a corporation, partnership, or similar entity, per CPA Practice Advisor. It would also make targeted changes to the indicators of significant influence in Subtopic 323-10 and clarify how investors apply the equity method when allocation structures are complex. The comment period closes January 11, 2027, per CPA Practice Advisor.

For the close team, the immediate question is whether any existing equity method investments are currently scoped in or out based on legal-form criteria that would not survive the proposed single-threshold test. Re-evaluating those positions before a final standard arrives is easier than restating. Complex allocation structures - particularly in fund and joint venture investments - may also need a fresh look against the proposed clarifications.

No effective date has been stated; the proposal is open for comment through January 11, 2027, per CPA Practice Advisor. FASB will consider stakeholder feedback before finalizing the amendments, and the timeline to a final standard is not stated in listed sources.

WHAT TO DO IN THE CLOSE

 
 Inventory all equity method investments and note which rely on legal-form criteria rather than significant influence alone.
 
 Flag investments in partnerships or similar entities where scoping could shift under a unified significant-influence threshold.
 
 Identify equity method investments with complex allocation structures and document current policy before guidance arrives.
 
 Assign a comment-letter owner and calendar the January 11, 2027 deadline if the proposal affects your portfolio.
 
 Add a SAB 74 disclosure checklist item for this proposed ASU if you file with the SEC and the impact may be material.
FREE, TWICE A WEEK
Get Month End Closers in your inbox
Tuesday: the flagship edition. Friday: the tie-out, the close ahead and one number.

SPONSORED

Gusto: full-service payroll that posts clean journal entries to your ledger
Federal, state and local filing in all 50 states, native two-way sync to QuickBooks Online and Xero, and published per-employee pricing with no contract. Audit Friendly scored it 74/100 in a fact-checked review; we earn a referral fee if you sign up, and the score is not affected.

QUESTIONS THIS ANSWERS

What entities does the FASB equity method proposed ASU affect?

Per CPA Practice Advisor, the proposed amendments would affect all entities with investments currently accounted for under the equity method and investments evaluated to determine whether the equity method applies.

What are the two main issues the proposed ASU addresses?

The proposal addresses different scope criteria for corporations versus partnerships and the lack of authoritative guidance on allocating earnings in complex allocation structures for non-real estate entity investments, per CPA Practice Advisor.

When is the comment deadline for the equity method investments proposed ASU?

CPA Practice Advisor reports the comment deadline is January 11, 2027. No effective date for a final standard has been stated.

SOURCES

Where this comes from

See who is hiring controllers →

Every posting on the board is verified live.

GO DEEPER

Go deeper

Accounting and finance job board → The Audit Friendly job board, every posting verified live
The insights wire → Cross-dataset findings, refreshed hourly
Skills that pay → Which named tools move the number
AF Stack Designer → Design your accounting stack in ten minutes

A living page: it is re-read and updated as coverage arrives; last updated Thursday October 29. Facts come from the linked sources; confirm against the issuer's own text before relying on it.

Audit Friendly's flagship weekly for the people who run the close: the tools, the workflows, what the roles pay and who is hiring.

Accounting Stack · Audit Friendly Data · Accounting & Finance Jobs

Audit Friendly · members.auditfriendly.co

Recommended for you

View all
caret-right