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A Roadmap to Accounting for Equity Method Investments and Joint Ventures (2019)

Published on: 30 Sep 2019

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 is written on the assumption that entities have adopted certain accounting standards that have impacts on accounting for equity method investments, including, but not limited to, FASB Accounting Standards Update (ASU) 2014-09, Revenue From Contracts With Customers; ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities; and ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.

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