ASC 946 is the US GAAP topic for investment companies, the accounting rules behind the financial statements of most US private funds. It decides which entities count as investment companies, requires them to carry investments at fair value, and shapes the statements and disclosures LPs receive.
This guide explains ASC 946 from the LP side: who qualifies, how measurement works, which statements a fund produces, and what to check in a GP’s financial statements.
Key takeaways
- Status depends on characteristics. Since ASU 2013-08, an entity is an investment company if it has three fundamental characteristics. Five typical characteristics guide the judgment.
- Investments are carried at fair value. Changes in fair value run through the statement of operations, and the fund does not consolidate the operating companies it invests in.
- The statement set is standard. Statement of assets and liabilities, schedule of investments, statement of operations, statement of changes in net assets, notes, financial highlights, and usually a statement of cash flows.
- Private funds get lighter rules. Nonregistered investment partnerships may present a condensed schedule of investments, and nonpublic entities have lighter Level 3 disclosures.
- LPs often value their fund interests at NAV. The practical expedient in ASC 820 lets many LPs measure fund interests at the NAV the GP reports. Our NAV practical expedient guide covers it.
What is ASC 946?
ASC 946, Financial Services: Investment Companies, is the topic in the FASB Accounting Standards Codification that sets accounting and reporting for investment companies. It covers funds registered under the Investment Company Act of 1940 and private funds that meet its definition, including private equity, venture capital, private credit, and hedge funds.
ASU 2013-08 rewrote the definition of an investment company, effective for fiscal years beginning after December 15, 2013. Real estate investment trusts are outside its scope. An investment company must also disclose that it is one and that it applies ASC 946.
Who qualifies as an investment company
Fundamental characteristics (all required)
- 1
- The entity obtains funds from one or more investors and provides them with investment management services.
- 2
- It commits to its investors that its business purpose and only substantive activities are investing for capital appreciation, investment income, or both.
- 3
- Neither the entity nor its affiliates obtain returns or benefits from its investments other than capital appreciation or investment income.
Typical characteristics (judgment)
- 1
- More than one investment.
- 2
- More than one investor.
- 3
- Investors that are not related parties of the parent or the investment manager.
- 4
- Ownership interests in the form of equity or partnership interests.
- 5
- Substantially all investments managed on a fair value basis.
An entity that lacks one or more typical characteristics can still qualify, but it must disclose why it still concludes that it is an investment company. Funds registered under the 1940 Act are investment companies by definition.
How ASC 946 measures investments
- Fair value. Investments are carried at fair value under ASC 820, and changes in fair value run through the statement of operations as unrealized gains and losses.
- No consolidation of portfolio companies. The fund reports the companies it owns as investments at fair value, even when it controls them. The main exception is an operating company that provides services to the investment company itself.
- Interests in other funds. Noncontrolling interests in other investment companies are measured at fair value, not with the equity method, and are often measured at NAV as a practical expedient.
Most private fund investments end up in Level 3 of the fair value hierarchy. Our guide to Level 3 assets explains the disclosures that come with that.
The financial statements of an investment company
| Statement | What it shows | What LPs use it for |
|---|---|---|
| Statement of assets and liabilities | Investments at fair value, cash, other assets, liabilities, and net assets | Ties to the schedule of investments and to the sum of capital accounts |
| Schedule of investments | The fund’s holdings, full or condensed | Look-through exposure by company, industry, and country |
| Statement of operations | Investment income, expenses, realized gains, and the change in unrealized gains | Where valuation changes show up |
| Statement of changes in net assets (partners’ capital) | Contributions, distributions, and the result of operations | Ties to your capital account statement |
| Statement of cash flows | Cash from operating and financing activities; some funds are exempt | Capital calls, distributions, and borrowing under credit lines |
| Financial highlights | Ratios of expenses and net investment income to average capital, plus a return measure | Cost and return context; private equity funds often show an IRR since inception |
| Notes | Accounting policies, fair value disclosures, fees, related parties, commitments | Valuation detail and fee terms |
Disclosures that matter most to LPs
- Schedule of investments. Private partnerships may present a condensed schedule that names only positions above 5% of net assets. Our schedule of investments guide explains the rules.
- Fund of funds look-through. A fund of funds must name underlying holdings whose proportional share exceeds 5% of its net assets. See our look-through analysis guide.
- Fair value. The hierarchy table, valuation techniques, significant unobservable inputs, and Level 3 activity.
- Financial highlights. Expense ratios and a return measure, which ILPA’s sample statements show as an IRR since inception.
- Fees and related parties. Management fees, offsets, and transactions with the GP and its affiliates.
ASC 946 and IFRS investment entities
IFRS has a similar concept: investment entities under IFRS 10 measure their subsidiaries at fair value instead of consolidating them. ASU 2013-08 brought the two frameworks closer. One difference in wording: IFRS requires that an entity measures and evaluates the performance of substantially all of its investments on a fair value basis, while US GAAP asks whether it manages them on a fair value basis.
What to check in a GP’s financial statements
-
Investment company status
The notes should state that the fund is an investment company applying ASC 946.
-
A complete statement set
Look for each statement in the table above, or a note explaining why one is omitted.
-
Full or condensed schedule
If the schedule is condensed, ask whether the GP provides full detail separately.
-
Fair value disclosures
Check the share of Level 3 investments, the techniques, and the significant unobservable inputs.
-
Financial highlights
Read the expense ratios and the return measure, and compare them with the GP’s quarterly reporting.
-
Timing and the audit opinion
Advisers relying on the custody rule’s audit provision must deliver audited statements within 120 days of fiscal year end, or 180 days for funds of funds.
How FundCount works with investment company statements
FundCount AI Document Intelligence collects statements from your investor portals and email, converts them into accounting-ready data, and posts them to your books, with the source document one click from each posted figure. It now also extracts the schedule of investments from GP financial statements, the most detailed part of the ASC 946 statement set for an LP.
- Extracts asset-level data from GP financial statements: security name, industry, country, round or share class, shares, cost, and fair value.
- Tracks quarter-over-quarter movements in cost and fair value for each holding.
- Shows exposure by industry, country, and share class, filtered by year, quarter, fund, and holding company.
- Shows where the same security appears across different GPs.
- Keeps co-investments, valued from their own schedules of investments, next to fund holdings.
The extracted data sits in the same platform that runs FundCount’s portfolio accounting, partnership accounting, and reporting, used by family offices and by the fund administrators that report to LPs.
For GPs and fund administrators that prepare these statements, FundCount’s reporting covers financial statements and audit support with drill-down to the source transaction.
Watch-outs
- FundCount extracts what each GP discloses. Grouped lines in a condensed schedule stay grouped until the GP provides the names.
- Holdings data covers what each fund owns and what it is worth. Company KPIs such as revenue and EBITDA come from GP portfolio company updates.
Turn GP financial statements into usable data
In a guided walkthrough on real-world scenarios, we read a GP’s financial statements, extract the schedule of investments, and show the holdings by industry and country.
FAQs
What is ASC 946?
The FASB topic that sets accounting and reporting rules for investment companies under US GAAP, including most US private funds.
Who has to follow ASC 946?
Entities that meet its definition of an investment company: funds registered under the Investment Company Act of 1940 and private funds with the three fundamental characteristics.
What are the fundamental characteristics of an investment company?
It provides investment management services to investors, its only business is investing for capital appreciation, investment income, or both, and neither it nor its affiliates obtain other returns or benefits from its investments.
Does ASC 946 require a schedule of investments?
Yes. Nonregistered investment partnerships may present a condensed schedule that names only positions above 5% of net assets.
Do investment companies consolidate their portfolio companies?
Generally not. They carry them at fair value. The main exception is an operating company that provides services to the investment company itself.
How does ASC 946 relate to ASC 820?
ASC 946 requires investment companies to measure investments at fair value, and ASC 820 defines fair value, the fair value hierarchy, and the related disclosures.
What is the difference between ASC 946 and IFRS investment entities?
Both carry investments at fair value instead of consolidating them. The definitions differ in detail, for example IFRS refers to measuring and evaluating performance on a fair value basis, US GAAP to managing it.
Sources and methodology
Sources: ASU 2013-08 (FASB, June 2013) as summarized by Deloitte, PwC, Kroll, and Marcum; FASB ASC 946-210-50, as quoted in SEC staff correspondence; ILPA Quarterly Reporting Standards, Best Practices, version 1.0 (October 2011); SEC Advisers Act Rule 206(4)-2(b)(4), as cited in SEC enforcement orders. FundCount capabilities come from FundCount’s product documentation and client announcements, reviewed in October 2026.
Scope: general information, not investment, accounting, or legal advice.
Published: October 2026.
