9.6 Other Matters
9.6.1 Disclosure Requirements
A joint venture is required to provide specific disclosures aimed at giving
financial statement users a better understanding of the nature and financial
effect of the joint venture’s formation in the period in which the formation
occurred.
ASC 805-60
50-1 A
joint venture shall disclose information that enables
users of its financial statements to understand the
nature and financial effect of the joint venture
formation in the period in which the formation date
occurs.
50-2 In the period of
formation, a joint venture shall disclose the following:
- The formation date
- A description of the purpose for which the joint venture was formed (for example, to share risks and rewards in developing a new market, product, or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities)
- The formation-date fair value of the joint venture as a whole
- A description of the assets and liabilities recognized by the joint venture at the formation date
- The amounts recognized by the joint venture for each major class of assets and liabilities as a result of accounting for its formation, either presented on the face of financial statements or disclosed in the notes to financial statements (see paragraph 805-60-45-1)
- A qualitative description of the factors that make up any goodwill recognized, such as expected synergies from combining operations of the contributed assets or businesses, intangible assets that do not qualify for separate recognition, or other factors.
50-3 If
the initial accounting for a joint venture formation is
incomplete (see paragraph 805-60-25-14) for particular
assets, liabilities, noncontrolling interests, or the
formation-date fair value of the joint venture as a
whole and the amounts recognized in the financial
statements for the joint venture formation thus have
been determined only provisionally, the joint venture
shall disclose the following information:
- The reasons why the initial accounting is incomplete
- The assets, liabilities, noncontrolling interests, or the formation-date fair value of the joint venture as a whole for which the initial accounting is incomplete
- The nature and amount of any measurement period adjustments recognized during the reporting period, including separately the amount of adjustment to current-period income statement line items relating to the income effects that would have been recognized in previous periods if the adjustment to provisional amounts was recognized as of the formation date.
9.6.2 Private-Company Alternative for Certain Intangible Assets
ASC 805-60 applies to the formation of all entities that meet
the definition of a joint venture or corporate joint venture regardless of
whether the newly formed joint venture is a PBE or private company. For joint
ventures that are private companies, ASC 805-60 provides a private-company
alternative to simplify the recognition of certain identifiable intangible
assets and subsume them into goodwill. This alternative applies to (1)
noncompetition agreements and (2) customer-related intangible assets unless they
are capable of being sold or licensed separately from other assets of a business
(see Section
8.2.1.1 of Deloitte’s Roadmap Business Combinations for further
discussion). If this alternative is selected, an entity must adopt the
accounting alternative for amortizing goodwill in accordance with ASC
350-20.
ASC 805-60
25-12 A joint
venture that is a private company may elect to apply the
accounting alternative for the recognition of
identifiable intangible assets described in paragraphs
805-20-25-30 through 25-33. In accordance with paragraph
805-20-15-4, a joint venture that elects to apply this
accounting alternative must adopt the accounting
alternative for amortizing goodwill in the Accounting
Alternatives Subsections of Subtopic 350-20.