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New JV Accounting Rules – Fair Value Required

FASB has issued its first-ever guidance providing recognition and initial measurement for joint ventures. Read on for details on the guidance.
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On August 23, 2023, FASB issued Accounting Standards Update (ASU) 2023-05, providing—for the first time—recognition and initial measurement for joint ventures (JVs). To reduce diversity in practice and provide decision-useful information to investors, a JV would be required to apply a new basis of accounting. At formation, a newly formed JV would initially generally measure its assets and liabilities at fair value. The ASU does not change the JV definition, the accounting by an equity method investor for its JV investment, or the accounting by a JV for contributions received after formation. This article provides details on the guidance.

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