New white paper on accounting for joint venture formations

ARTICLE | December 20, 2023

Authored by RSM US LLP

Our white paper, Joint venture formations, explains the requirements of Accounting Standards Update (ASU) 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which was issued by the Financial Accounting Standards Board in August 2023. ASU 2023-05 establishes guidance for the accounting for the formation of a joint venture in the separate financial statements of the joint venture. Under the new requirements, the following steps should be applied in accounting for a joint venture at formation:

  • Determine the formation date.
  • Recognize and measure any identifiable assets, liabilities, and any noncontrolling interest in accordance with Accounting Standards Codification 805-20, Business Combinations ? Identifiable Assets and Liabilities, and Any Noncontrolling Interest.
  • Recognize and measure goodwill, if any, utilizing the fair value of the joint venture as a whole immediately after formation.

Our white paper further discusses these steps, including the scope, disclosures, transition method, and effective date of ASU 2023-05. Additionally, the paper briefly highlights how to apply the existing joint venture definition and the accounting at formation by the venturers.

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This article was written by RSM US LLP and originally appeared on 2023-12-20.
2022 RSM US LLP. All rights reserved.

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