This article systematizes the main issues: the boundaries of the accounting object (fund vs. management company), the moment of recognition and assessment of carry as variable compensation/profit share, the impact of waterfall conditions (deal-by-deal vs whole-of-fund, preferred (Return, catch-up, escrow, cla wback) on accruals, classification of liabilities and capital instruments, comparability of financial statements, and control procedures. Based on the requirements of IFRS (IFRS 10, IAS 32, IFRS 15) and practice-oriented guidance (AICPA, KPMG, PwC, EY, ILPA), a set of methodological principles for developing accounting policies and disclosures is proposed.
Methodological Problems of Accounting for Carried Interest and Waterfall Distributions in Investment Funds
DOI:
Keywords:
Carried interest
waterfall
private equity
Abstract
References
Understanding Private Equity Funds: A Guide to... / JR Kaplan, BA Sensoy , P. Strömberg // Journal of Financial Reporting. – 2021. – Vol. 9, No. 1. – P. 21–65. – URL: https://publications.aaahq.org/jfr/article-abstract/9/1/21/11509/Understanding-Private-Equity-Funds-A-Guide-to ( date accesses : 13.12.2025).
Making Sense of Tiered Carried Interest Structures [Electronic resource]. – URL: https://privateequitybro.com/making-sense-of-tiered-carried-interest-structures/ ( date accesses : 13.12.2025).
Stefanova M. The Definitive Guide to Carried Interest: Contents and Extracts [Electronic resource]. – London: Private Equity International, 2019. – URL: https://media.privateequityinternational.com/uploads/2019/07/The-Definitive-Guide-to-Carried-Interest-Contents-and-Extract.pdf ( date accesses : 12/14/2025).
Distribution waterfall [Electronic resource] // Wikipedia . – URL : https :// en . wikipedia . org / wiki / Distribution _ waterfall (date of access: 12/16/2025).
Phalippou L. A Note on Carried Interest in Private Equity [Electronic resource]. – SSRN, 2015. – URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2640498 ( date accesses : 12/14/2025).
Illustrative IFRS Consolidated Financial Statements 2019 [Electronic resource]. – Vienna: PwC, 2019. – URL: https://www.pwc.at/de/newsletter/ifrs/musterabschluesse/2019/07-2019-ifrs-consolidated-financial-statements.pdf ( date accesses: 12/15/2025).
Private Equity Fund Terms Research: Core Economic Terms – Hurdle Rate and Carried Interest [Electronic resource]. – URL: https://www.mondaq.com/uk/maprivate-equity/725872/private-equity-fund-terms-research-core-economic-terms--h urdle-rate-and-carried-interest (date accesses: 12/15/2025).
EY. How the New Revenue Standard Affects Asset Managers [Electronic resource]. – 2018. – URL: https://www.ey.com/en_gl/assurance/how-the-new-revenue-standard-affects-asset-managers ( date accesses : 16.12.2025).
Institutional Limited Partners Association (ILPA). Private Equity Principles 3.0 [Electronic resource]. – 2019. – URL : https :// ilpa . org / principles (date of access: 12/16/2025).