About Processing Transactions for Carried Interest Agreements
Process transactions for joint ventures that are associated with carried interest agreements. A carried interest agreement enables you to:
- Distribute transactions for costs and revenue to the consenting stakeholders in a joint venture.
- Track the amounts that consenting stakeholders carry for nonconsenting stakeholders.
- Calculate and track penalties associated with the carried interest agreement.
- Report payout balances and automatically end the carried interest agreement when payout is reached.
Using Joint Venture Management to process carried interest agreements eliminates the need to manually track carried balances, penalties, and payout status. It enables timely and accurate processing of carried interest throughout the life cycle of the agreement until payout is reached.
Payout occurs when a nonconsenting stakeholder’s accumulated carried costs and penalties are fully offset by carried revenue. When payout occurs, any excess revenue is payable to the nonconsenting stakeholder and the nonconsenting stakeholder can resume active participation in the joint venture. The carried interest agreement is automatically ended when all nonconsenting stakeholders have reached payout.
You run the same processes for a joint venture with a carried interest agreement as you would for one without a carried interest agreement. The difference is that Joint Venture Management uses carried interest ownership definitions instead of standard ownership definitions to distribute transactions. This enables you to generate two types of distributions:
- Standard distributions of costs and revenue to the consenting stakeholders, which include the share they’re carrying for nonconsenting stakeholders. These distributions include the name of the carried interest agreement for identification purposes.
- Carried interest distributions to track the amounts consenting stakeholders carry for nonconsenting stakeholders, including penalty amounts, balances, and payout tracking.
Before you distribute transactions for a carried interest agreement, you can override a carried interest ownership definition assigned to a joint venture transaction with another ownership definition. However, once you override it, you can’t change it back.