FASB Joint Venture Formations


On Aug. 23, FASB issued joint venture formation accounting standards


  • FASB issued standard that improves accounting for joint venture formations.
  • Joint Venture Formation
  • Provides investors with more decision-useful information in a joint venture’s finances.
  • The updated standard reduces diversity in practice in this area of financial reporting.
  • The ASU applies to the formation of entities that meet the definition of a joint venture as defined in the FASB Accounting Standards Codification Master Glossary.
  • There has been no specific guidance that applies to formation accounting in separate financial statements, specifically recognition and initial measurement of net assets.
  • Stakeholders noted that lack of guidance has resulted in diversity in practice in how contributions to a joint venture upon formation are accounted for by the joint venture.
  • Amendments provide decision-useful information to venture’s investors and reduce diversity in practice by requiring a new basis of accounting upon venture's formation.
  • Newly formed joint venture would initially measure its assets and liabilities at fair value
  • There are exceptions to fair value consistent with the business combinations guidance.
  • Effectiveness
  • Effective for all joint ventures with a formation date on or after Jan. 1, 2025.
  • Early adoption is permitted, and a joint venture that was formed before effective date of the ASU may elect to apply amendments retrospectively if sufficient information.

Regulators FASB
Entity Types Auditor; Corp
Reference PR, ASU 2023-05, 8/23/2023
Functions Accounting; Actuarial and Valuation; Audit; Financial
Countries United States of America
Category
State
Products Corporate
Regions Am
Rule Type Final
Rule Date 8/23/2023
Effective Date 1/1/2025
Rule Id 182856
Linked to N/A
Reg. Last Update 8/23/2023
Report Section US Investment

Last substantive update on 08/25/2023