Articles On This Page
Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement
FASB Accounting Standards Updates - Accounting Standards Update No. 2023-05 — Business Combinations—Joint Venture Formations (Subtopic 805-60) – Recognition and Initial Measurement
Joint Ventures –FASB Issues Standard on Accounting for Joint Venture Formations
Business Combinations – FASB Discusses Intangible Assets in a Business Combination
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-08 —Business Combinations (Topic 805) —Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
FASB Discusses Business Combinations and Asset Purchases
Business Combinations (Topic 805): Clarifying the Definition of a Business - FASB ASU 2017-01
Articles
Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement
Summary - This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification® Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements. The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).
For more information, click here.
© 2024 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Accounting Standards Updates - Accounting Standards Update No. 2023-05 — Business Combinations—Joint Venture Formations (Subtopic 805-60) – Recognition and Initial Measurement
Summary -The FASB issued Accounting Standard Update (ASU) No. 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, intended to (1) provide investors and other allocators of capital with more decision-useful information in a joint venture’s separate financial statements and (2) reduce diversity in practice in this area of financial reporting.
The ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification® Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to 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. Stakeholders noted that the lack of guidance has resulted in diversity in practice in how contributions to a joint venture upon formation are accounted for by the joint venture.
The amendments in the ASU provide decision-useful information to a joint venture’s investors and reduce diversity in practice by requiring that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).
The amendments in this ASU are effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. Additionally, a joint venture that was formed before the effective date of the ASU may elect to apply the amendments retrospectively if it has sufficient information.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Joint Ventures –FASB Issues Standard on Accounting for Joint Venture Formations
Summary - The FASB issued Accounting Standard Update (ASU) No. 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, intended to (1) provide investors and other allocators of capital with more decision-useful information in a joint venture’s separate financial statements and (2) reduce diversity in practice in this area of financial reporting.
The ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification® Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to 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. Stakeholders noted that the lack of guidance has resulted in diversity in practice in how contributions to a joint venture upon formation are accounted for by the joint venture.
The amendments in the ASU provide decision-useful information to a joint venture’s investors and reduce diversity in practice by requiring that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).
The amendments in this ASU are effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. Additionally, a joint venture that was formed before the effective date of the ASU may elect to apply the amendments retrospectively if it has sufficient information.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Business Combinations – SEC Staff Updates Compliance and Disclosure Interpretations
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated the following Compliance and Disclosure Interpretations (C&DIs):
- Exchange Act Form 8-K (Question 102.04-102.05);
- Proxy Rules and Schedules 14A/14C (101.02, 132.01-132.02); and
- Tender Offers and Schedules (166.01).
Corp Fin has updated these C&DIs to provide additional guidance on disclosures associated with entering into a business combination agreement. This updated guidance includes discussion of when a company must disclose material terms and conditions when entering into a business combination agreement that is reportable under Item 1.01 of Form 8-K. The updated guidance also discusses certain proxy disclosure rules related to whether public communications represent solicitations subject to such rules. Finally, the updated guidance discusses Corp Fin’s views on whether SEC Rule 14e-5 on the prohibition of purchases outside of a tender offer applies to transactions involving Special Purpose Acquisition Companies.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Business Combinations – FASB Discusses Intangible Assets in a Business Combination
Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 2, 2022, and discussed: (1) the accounting for identifiable intangible assets in a business combination; and (2) the goodwill balances that should be included in the scope of the subsequent accounting guidance for goodwill. The latter included goodwill arising from a reorganization, goodwill at a subsidiary (including from applying pushdown accounting), and goodwill arising from applying the equity method of accounting. The FASB provided its leaning to require that an entity subsume contractual and noncontractual customer relationships into goodwill if they are not separable.
The FASB also provided its leaning to include reorganization goodwill, goodwill at a subsidiary, and equity method goodwill in the scope of subsequent accounting guidance for goodwill and to provide additional implementation guidance for entities applying pushdown accounting. No decisions were made.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.