![]() In reaching this decision about goodwill, the Board expects it to be uncommon that an entity that meets the definition of a JV would have significant goodwill at formation if it did not meet the definition of a business. Total net assets should be measured as the fair value of the JV as a whole, which is equal to the fair value of 100 percent of a JV’s equity immediately following formation (including any noncontrolling interest in the net assets recognized by the JV). Recognize goodwill as of the formation date as the difference between the JV’s total net assets and its identifiable net assets, when applicable.Account for its formation in accordance with business combinations guidance in Subtopic 805-20, Business Combinations-Identifiable Assets and Liabilities, and Any Noncontrolling Interest, and Subtopic 805-30, Business Combinations-Goodwill or Gain from Bargain Purchase, Including Consideration Transferred, regardless of whether the assets or group of assets recognized by the JV constitute a business in accordance with Subtopic 805-10, Business Combinations-Overall.In applying a new basis of accounting, the Board decided to affirm its decisions to require that a JV: The Board affirmed its decision that a JV be required to recognize and initially measure its assets and liabilities at fair value using a new basis of accounting upon formation. The Board affirmed its decision to define the formation date as the date on which an entity initially meets the definition of a joint venture (JV). The Board redeliberated the proposed Accounting Standards Update, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, and made the following decisions. That lack of authoritative guidance has been brought to the Board’s attention through several avenues over the last several years, both by the SEC staff and several practitioners that have requested that the Board clarify this issue through standard setting to improve practice and eliminate diversity.Īt the SeptemBoard meeting, the Board decided to add to its technical agenda a project on accounting by a joint venture for the initial measurement of contributions of nonmonetary assets made into the joint venture, and at the JBoard meeting, the Board decided to expand the scope of the project to include all contributions, irrespective of whether they are monetary or nonmonetary.ĭecisions Reached at Last Meeting (April 5, 2023): Securities and Exchange Commission (SEC) staff. In the absence of authoritative guidance by the Board, practice has been influenced by several speeches given by the U.S. Joint venture accounting is specifically not within the scope of both Topic 845, Nonmonetary Transactions, and Topic 805, Business Combinations. The accounting by a joint venture, specifically the initial recognition and measurement of contributions made by venturers to a joint venture at formation, is not currently addressed in the Codification. ![]() The objectives of the Joint Venture Formations (formerly known as the Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors) project are to (1) reduce diversity in practice in the accounting for contributions made to a joint venture upon formation in a standalone joint venture’s financial statements and (2) provide useful financial reporting information to financial statement users. ![]()
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