Company: PDCC
Filing Date: 2025-03-11
Form Type: N-CSR
Source: 0001398344-25-005419
Chunk: 15

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-03-11
Form: N-CSR
Chunk 15
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CLO Equity

ASC Topic 325-40, Beneficial Interests in Securitized
Financial Assets, requires investment income from equity tranche investments in collateralized loan obligations to be recognized under
the effective yield method, with any difference between cash distributed and the amount calculated pursuant to the effective yield method
being recorded as an adjustment to the amortized cost basis of the investment. The interest income is calculated using the effective yield,
based on the estimated cash flow expected to be collected over the life of the investment. It is the Company’s policy to update
the effective yield for each CLO equity investment held within the portfolio on no less than a quarterly basis.

CLO Debt

Interest income from investments in CLO debt is recorded
using the accrual basis of accounting to the extent such amounts are expected to be collected. Interest income on such investments is
generally expected to be received in cash. Amortization of premium or accretion of discount is recognized using the effective interest
method.

Loan Accumulation Facilities

Loan accumulation facilities recognize interest income
according to the guidance noted in ASC Topic 325-40-35-1, Beneficial Interest in Securitized Financial Assets, which states that the holder
of a beneficial interest in securitized financial assets shall determine interest income over the life of the beneficial interest in accordance
with the effective yield method, provided such amounts are expected to be collected. FASB ASC 325-40-20 further defines “beneficial
interests,” among other things, as “rights to receive all or portions of specified cash inflows received by a trust or other
entity.” FASB ASC 325-40-15-7 also states that for income recognition purposes, beneficial interests in securitized financial assets
(such as those in loan accumulation facilities) are within the scope of ASC 325-40 because it is customary for certain industries, such
as investment companies, to report interest income as a separate item in their income statements even though the investments are accounted
for at fair value. There were no holdings or reportable transactions during the fiscal period.

Federal and Other Taxes

The Company intends to continue to operate so as
to qualify to be taxed as a RIC under subchapter M of the Code and, as such, to not be subject to federal income tax on the portion of
its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, among other requirements, the Company is
required to distribute at least