PwC is pleased to offer our updated Equity method investments and joint ventures guide. This guide discusses the identification of investments that are subject to the equity method of accounting guidance, and the initial and subsequent accounting for those investments. It also includes discussion of the accounting upon formation of a joint venture.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in September 2023
Chapter 6: Joint ventures
- EM 6.4.1 was updated to reflect accounting by the joint venture entity for contributions received at formation, after adoption of ASU 2023-05, Business Combinations—Joint Venture Formations. The content previously in EM 6.4.1 on current accounting for contributions received at formation (before ASU 2023-05) was moved to EM 6.4A.1.
Revisions made in June 2023
Chapter 1: Scope
- EM 1.3.6 was updated to reflect the accounting for investments in tax credit entities after adoption of ASU 2023-02, including the broader application of the proportional amortization method. The content previously in EM 1.3.6, on current accounting for investments in tax credit entities, was moved to EM 1.3.6A.
Revisions made in February 2023
Chapter 3: Initial measurement of equity method investments
- Example EM 3-12 in EM 3.3.7 was updated to illustrate how to account for the excess amount when the fair value of the investment acquired exceeds the cost of the investment.
Revisions made in December 2022
Chapter 4: Subsequent accounting for equity method investments
- EM 4.4.2 was updated to address an investor’s accounting for the sale of an investment when reporting on a lag.
- Example EM 4-7 in EM 4.5.3 was updated to clarify the accounting model generally employed when an investor restores its investment balance after an investee returns to profitability
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