Chapter 8 — Accounting by the Joint Venture

Under ASU 2023-05 (issued in August 2023), an entity that qualifies as either a joint venture or a corporate joint venture, as defined in the ASC master glossary, is required to apply a new basis of accounting upon the formation of the joint venture (see Chapter 7 for a discussion of the identification of a joint venture or a corporate joint venture). Specifically, the ASU stipulates that a joint venture or a corporate joint venture (collectively, “joint ventures”) must initially measure its assets and liabilities at fair value on the formation date. The ASU’s amendments are effective prospectively for all joint ventures formed on or after January 1, 2025, with early adoption “permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively.” Joint ventures that were formed before January 1, 2025, can “elect to apply the amendments retrospectively if [they have] sufficient information.”