FASB Amends Guidance on Joint Venture Formations

The FASB has issued Accounting Standards Update (ASU) No. 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. The Board is releasing the ASU in an effort to reduce the diversity in practice that has resulted from the lack of U.S. GAAP guidance on “the formation accounting by a joint venture in its separate financial statements, specifically the joint venture’s recognition and initial measurement of net assets, including businesses contributed to it.”

The ASU’s amendments “are effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted.”

For more information, see the press release on the FASB’s Web site.