Carlyle Group Inc.CG
Carlyle Group Inc. Revenue Disclosure
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from
Contracts with Customers. Revenue is recognized when the Company transfers promised goods or services to customers in an
amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
ASC 606 includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, which includes
assessing the collectability of the consideration to which it will be entitled in exchange for the goods or services transferred to
the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the
transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a
performance obligation.
The Company accounts for performance allocations that represent a performance-based capital allocation from fund
limited partners to the Company (commonly known as “carried interest”) as earnings from financial assets within the scope of
ASC 323, Investments—Equity Method and Joint Ventures, and therefore are not in the scope of ASC 606. In accordance with
ASC 323, the Company records equity method income (losses) as a component of investment income based on the change in its
proportionate claim on net assets of the investment fund, including performance allocations, assuming the investment fund was
liquidated as of each reporting date pursuant to each fund’s governing agreements. See Note 4, Investments, for additional
information on the components of investments and investment income. Performance fees that do not meet the definition of
performance-based capital allocations are in the scope of ASC 606 and are included in incentive fees in the consolidated
statements of operations. The calculation of unrealized performance revenues utilizes investment valuations of the funds’
underlying investments, which are derived using the policies, methodologies and templates prepared by the Company’s
valuation group, as described in Note 3, Fair Value Measurement.
While the determination of who is the customer in a contractual arrangement will be made on a contract-by-contract
basis, the customer will generally be the investment fund for the Company’s significant management and advisory contracts.
The customer determination impacts the Company’s analysis of the accounting for contract costs.
Fund Management Fees
The Company provides management services to funds in which it holds a general partner interest or to funds or certain
portfolio companies with which it has an investment advisory or investment management agreement. The Company considers
the performance obligations in its contracts with its funds to be the promise to provide (or to arrange for third parties to provide)
investment management services related to the management, policies and operations of the funds.
As it relates to the Company’s performance obligation to provide investment management services, the Company
typically satisfies this performance obligation over time as the services are rendered, as the funds simultaneously receive and
consume the benefits provided as the Company performs the service. The transaction price is the amount of consideration to
which the Company expects to be entitled in exchange for transferring the promised services to the funds. Management fees
earned from each investment management contract over the contract life represent variable consideration because the
consideration the Company is entitled to varies based on fluctuations in the basis for the management fee, for example fund net
asset value (“NAV”) or assets under management (“AUM”). Given that the management fee basis is susceptible to market
factors outside of the Company’s influence, management fees are constrained and, therefore, estimates of future period
management fees are generally not included in the transaction price. Revenue recognized for the investment management
services provided is generally the amount determined at the end of the period because that is when the uncertainty for that
period is resolved.
For closed-end carry funds in the Global Private Equity segment, management fees generally range from 1.0% to 2.0%
of limited partners’ capital commitments during the fund’s commitment period. For closed-end carry funds in the Global Credit
segment, management fees generally range from 1.0% to 2.0% of limited partners’ invested capital. Following the expiration or
termination of the investment period, management fees generally are based on the lower of cost or fair value of invested capital
and the rate charged may also be reduced. These terms may vary for certain separately managed accounts, longer-dated carry
funds, and other closed-end funds. The Company will receive management fees during a specified period of time, which is
generally ten years from the initial closing date, or, in some instances, from the final closing date, but such termination date
may be earlier in certain limited circumstances or later if extended for successive one-year periods, typically up to a maximum
of two years. Depending upon the contracted terms of investment advisory or investment management and related agreements,
these fees are generally called semi-annually in advance and are recognized as earned over the subsequent six month period.
For certain longer-dated carry funds and certain other closed-end funds, management fees are called quarterly over the life of
the funds.
Within the Global Credit segment, for CLOs and other structured products, management fees generally range from
0.4% to 0.5% based on the total par amount of assets or the aggregate principal amount of the notes in the CLO and are
generally due quarterly in arrears based on the terms and recognized over the respective period. Management fees for the CLOs
and other structured products are governed by indentures and collateral management agreements. The Company will receive
management fees for the CLOs, generally for to ten years after issuance, including after the CLO redemption date until all
eligible assets are disposed of or at such time the collateral manager waives fees at its discretion. Management fees for the
business development companies are due quarterly in arrears at annual rates that range from 1.0% of capital under management
to 1.5% of gross assets, excluding cash and cash equivalents. Management fees for CTAC are due monthly in arrears at an
annual rate of 1.0% of the month-end value of the CTAC’s net assets. Carlyle Aviation Partners’ funds have varying
management fee arrangements depending on the strategy of the particular fund. Under the strategic advisory services agreement
with Fortitude, the Company earns a recurring management fee based on Fortitude’s general account assets, which adjusts
within an agreed upon range based on Fortitude’s overall profitability and is due quarterly in arrears. Management fees for
certain of our perpetual capital strategies and separately managed accounts in Global Credit have annual rates that generally
range from 0.10% to 0.75%, which are charged based on invested capital or the fair value of the underlying assets, though
management fee arrangements vary depending on the strategy of the particular account.
Management fees for the Company’s carry fund vehicles in the Carlyle AlpInvest segment generally range from 0.25%
to 1.5% of the vehicle’s capital commitments during the commitment fee period of the relevant fund. Following the expiration
of the commitment fee period, the management fees generally range from 0.25% to 1.5% on (i) the net invested capital, (ii) the
lower of cost or net asset value of the capital invested, or (iii) the net asset value for unrealized investments. Management fees
for the Carlyle AlpInvest carry fund vehicles are generally due quarterly in advance and recognized over the related quarter.
The investment advisers to the CAPM and CAPS funds are entitled to receive a monthly management fee generally equal to
1.25% on an annualized basis of the fund’s net asset value as of the last day of the month.
The Company also provides transaction advisory and portfolio advisory services to the portfolio companies, and where
covered by separate contractual agreements, recognizes fees for these services when the performance obligation has been
satisfied and collection is reasonably assured. The Company is generally required to offset its fund management fees earned
from the funds that have invested in the portfolio companies to which the service has been provided by a percentage of the
transaction and advisory fees allocable to those funds. This amount is referred to as the “rebate offset,” and is generally 100%.
Transaction and advisory fees allocable to funds that do not pay fund management fees do not have a rebate offset. The
Company also recognizes underwriting fees from the Company’s loan syndication and capital markets business, Carlyle Global
Capital Markets.Fund management fees exclude the reimbursement of any partnership expenses paid by the Company on behalf of the Carlyle funds pursuant to the limited partnership agreements, including amounts related to the pursuit of actual, proposed, or
unconsummated investments, professional fees, expenses associated with the acquisition, holding and disposition of
investments, and other fund administrative expenses. For the professional fees that the Company arranges for the investment
funds, the Company concluded that the nature of its promise is to arrange for the services to be provided and it does not control
the services provided by third parties before they are transferred to the customer. Therefore, the Company concluded it is acting
in the capacity of an agent. Accordingly, the reimbursement for these professional fees paid on behalf of the investment funds is
presented on a net basis in general, administrative and other expenses in the consolidated statements of operations.
The Company also incurs certain costs, primarily employee travel and entertainment costs, employee compensation
and systems costs, for which it receives reimbursement from the investment funds in connection with its performance obligation
to provide investment and management services. For reimbursable travel, compensation and systems costs, the Company
concluded it controls the services provided by its employees and the resources used to develop applicable systems before they
are transferred to the customer and therefore is a principal. Accordingly, the reimbursement for these costs incurred by the
Company to manage the fund limited partnerships are presented on a gross basis in interest and other income in the
consolidated statements of operations and the expense in general, administrative and other expenses or cash-based
compensation and benefits expenses in the consolidated statements of operations.
Incentive Fees
The Company is also entitled to receive performance-based incentive fees when the return on assets under
management exceeds certain benchmark returns or other performance targets. In such arrangements, incentive fees are
recognized when the performance benchmark has been achieved. Incentive fees are variable consideration because they are
contingent upon the investment vehicle achieving stipulated investment return hurdles. Investment returns are highly
susceptible to market factors outside of the Company’s influence. Accordingly, incentive fees are constrained until all
uncertainty is resolved. Estimates of future period incentive fees are generally not included in the transaction price because
these estimates are constrained. The transaction price for incentive fees is generally the amount determined at the end of each
accounting period to which they relate because that is when the uncertainty for that period is resolved, as these fees are not
subject to clawback. In such arrangements, the Company is entitled to an incentive fee allocation generally between 10.0% and
17.5% of either pre-incentive investment income or net profits, in some instances subject to a quarterly hurdle rate and catch-
up, payable quarterly.
Investment Income (Loss), including Performance Allocations
Investment income (loss) represents the unrealized and realized gains and losses resulting from the Company’s equity
method investments, including any associated general partner performance allocations, and other principal investments,
including CLOs.
General partner performance allocations consist of the allocation of profits from certain of the funds to which the
Company is entitled (commonly known as carried interest).
For closed-end carry funds in the Global Private Equity and Global Credit segments, the Company is generally entitled
to a 20% allocation (or approximately 2% to 12.5% for most of the Carlyle AlpInvest segment carry fund vehicles) of the net
realized income or gain as a carried interest after returning the invested capital, the allocation of preferred returns of generally
7% to 9% and return of certain fund costs (generally subject to catch-up provisions as set forth in the fund limited partnership
agreement). These terms may vary on longer-dated funds, certain credit funds, and external co-investment vehicles. Carried
interest is recognized upon appreciation of the funds’ investment values above certain return hurdles set forth in each respective
partnership agreement. The Company recognizes revenues attributable to performance allocations based upon the amount that
would be due pursuant to the fund partnership agreement at each period end as if the funds were terminated at that date.
Accordingly, the amount recognized as investment income for performance allocations reflects the Company’s share of the
gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair
values as of the end of the prior period. Because of the inherent uncertainty, these estimated values may differ significantly
from the values that would have been used had a ready market for the investments existed, and it is reasonably possible that the
difference could be material.
Carried interest is ultimately realized when: (i) an underlying investment is profitably disposed of, (ii) certain costs
borne by the limited partner investors have been reimbursed, (iii) the fund’s cumulative returns are in excess of the preferred
return, and (iv) the Company has decided to collect carry rather than return additional capital to limited partner investors.
Realized carried interest may be required to be returned by the Company in future periods if the fund’s investment values
decline below certain levels. When the fair value of a fund’s investments remains constant or falls below certain return hurdles,
previously recognized performance allocations are reversed. In all cases, each fund is considered separately in this regard, and
for a given fund, performance allocations can never be negative over the life of a fund. If upon a hypothetical liquidation of a
fund’s investments at their then-current fair values, previously recognized and distributed carried interest would be required to
be returned, a liability is established for the potential giveback obligation.Principal investment income (loss) is realized when the Company redeems all or a portion of its investment or when the Company receives or is due cash income, such as dividends or distributions. Unrealized principal investment income (loss)
results from the Company’s proportionate share of the investee’s unrealized earnings, including changes in the fair value of the
underlying investment, as well as the reversal of unrealized gain (loss) at the time an investment is realized. As it relates to the
Company’s investments in NGP (see Note 4, Investments), principal investment income includes the related amortization of the
basis difference between the Company’s carrying value of its investment and the Company’s share of underlying net assets of
the investee, as well as the compensation expense associated with compensatory arrangements provided by the Company to
employees of its equity method investee, and impairment charges.
Interest Income
Interest income is recognized when earned. For debt securities representing non-investment grade beneficial interests
in securitizations, the effective yield is determined based on the estimated cash flows of the security. Changes in the effective
yield of these securities due to changes in estimated cash flows are recognized on a prospective basis as adjustments to interest
income in future periods. Interest income earned by the Company is included in interest and other income in the accompanying
consolidated statements of operations.Deferred RevenueDeferred revenue represents management fees and other revenue received prior to the balance sheet date, which has
not yet been earned. Deferred revenue also includes transaction and portfolio advisory fees received by the Company that are
required to offset fund management fees pursuant to the related fund agreements.Free Sentinel
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About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.