A Roadmap to Accounting for Equity Method Investments and Joint Ventures

This Roadmap provides Deloitte’s insights into and interpretations of the guidance on accounting for equity method investments and joint ventures.

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Preface Contacts Chapter 1 — Overview Chapter 2 — Scope and Scope Exceptions Chapter 3 — Applying the Equity Method of Accounting Chapter 4 — Initial Measurement Chapter 5 — Subsequent Measurement Chapter 6 — Presentation and Disclosure Chapter 7 — Identification of a Joint Venture Chapter 8 — Accounting by the Joint Venture Chapter 9 — Accounting by the Venturer Appendix A — Glossary of Terms Appendix B — Differences Between U.S. GAAP and IFRS Standards Appendix C — Titles of Standards and Other Literature Appendix D — Abbreviations Appendix E — Changes Made in the 2020 Edition of This Publication

This Roadmap provides Deloitte’s insights into and interpretations of the guidance on accounting for equity method investments and joint ventures. Although Chapter 6 in this publication covers the presentation and disclosure requirements for equity method investments for SEC registrants, readers who wish to explore this topic in depth may consult Deloitte’s A Roadmap to SEC Reporting Considerations for Equity Method Investees.

The accounting principles related to equity method investments and joint ventures have been in place for many years, but they can be difficult to apply. The lack of prescriptive guidance surrounding initial measurement upon formation of a joint venture and accounting for equity method basis differences, as well as on the calculation of an investor’s share of earnings or losses of an investee, particularly in complex capital structures, has resulted in diversity in practice. For these reasons, accounting for equity method investments and joint ventures can be a particularly challenging aspect of U.S. GAAP.

This Roadmap includes pending guidance in several Accounting Standards Updates (ASUs) issued by the FASB, including, but not limited to, ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2014-09, Revenue From Contracts With Customers; and ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. Within each applicable section, we provide an overview of significant changes that may result from the adoption of these ASUs; however, the interpretive guidance within this Roadmap reflects U.S. GAAP before the ASUs’ adoption.