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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Source: RSM US LLP.
Reprinted with permission from RSM US LLP.
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