to define the term “formation date” in the Master Glossary.to describe the formation date as the point in time at which an entity initially meets the definition of a joint venture.“And I think it’s contributed to the diversity and the confusion in practice and so I think to that end that fair value is the better measure and I think it creates that alignment,” she said.ĭiscussions also focused on nine technical miscellaneous issues that were raised by external reviewers, plus three related to formation date and contingent payments. ![]() “I think that the issuance of 2017-5 created this mismatch between the venturer’s accounting and the joint venture’s accounting,” FASB member Susan Cosper said. That subtopic requires that the acquirer recognize and measure the identifiable assets acquired and liabilities assumed at fair value (with certain exceptions).īoard members observed that prior rules have created reporting issues, which the proposal could align. The acquirer of a business must apply the recognition and measurement guidance in Subtopic 805-20, Business Combinations–Identifiable Assets and Liabilities, and Any Noncontrolling Interest, to identifiable assets and liabilities. The proposal would require that a joint venture, upon formation, account for contributions by the venturers as though the joint venture was the acquirer of a business within the scope of Subtopic 805-10, Business Combinations–Overall. “I think we’ve done the work to get to the point where, at least I’m convinced preliminarily, we have a cost beneficial solution,” FASB Vice Chair James Kroeker said. Overall, the guidance aims to: reduce accounting differences among entities improve the usefulness and relevance of the information provided to a joint venture’s financial statement users upon formation and eliminate or reduce basis differences of joint ventures’ financial statements when compared with the reported investment by venturers.Ĭompanies may incur one-time costs “to identify and measure the net assets contributed upon formation” and recurring costs “in order to comply with the subsequent measurement requirements for certain assets including to intangible assets and goodwill,” which is justifiable, board members said. ![]() “I think ‘new basis’ is challenging but I think we’ve come up with the fundamental question of ‘what basis do you use’ I also look forward to the input that we receive as part of the exposure process.” “I do think it’s helpful that we provide guidance in this area,” FASB Chair Richard Jones said. This has created accounting differences among entities, confusing those who have to use the financial reporting information to make investment decisions. ![]() The guidance was developed because GAAP does not contain rules about the initial recognition and measurement of contributions made by venturers to a joint venture at formation. The proposal will be issued around mid-October with a public comment period spanning 60 days, the discussions indicated. The changes, however, would likely affect only a limited number of transactions and entities and would have no significant consequential effects on other accounting topics or subtopics. The provisions would also change existing recognition and measurement guidance in a way that could significantly change reported financial information by some entities, according to the discussions. 14, 2022, unanimously voted to issue a proposal that would create new requirements for joint ventures that do not exist in U.S.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |