The Financial Accounting Standards Board has issued an Accounting Standards Update. The update provides investors and other allocators of capital with more decision-useful information in a joint venture's separate financial statements and reduces diversity in practice in this area of financial reporting.
The ASU is applicable to entity formation that meets the definition of a joint venture or corporate joint venture, which is defined in the FASB Accounting Standards Codification Master Glossary. The update provides more guidance for the formation accounting by a joint venture in its separate financial statements, with the recognition and initial measurements of net assets and the businesses contributed to it in particular. This clarity should reduce the diversity in how contributions to a joint venture upon formation are accounted for by the join venture.
The ASU means that newly formed joint ventures will initially assess assets and liabilities at fair value at the time of formation.
The amendments in this ASU are effective prospectively for all joint ventures with a formation date on or after January 1, 2025, with early adoption permitted.
The ASU is available at www.fasb.org.