Joint venture accounting: Why it matters

Distinguishing between a commercial joint venture and an accounting joint venture can be judgmental and will impact the accounting. In this week’s episode, Matt Sabatini, a partner in PwC’s National Office, joins host Heather Horn to discuss the accounting and financial reporting matters for companies to consider for an interest in a joint venture, as well as the accounting by the joint venture itself.Topics include:0:20 - Commercial joint ventures. When multiple investors come together to achieve a common goal, it’s important to think through how the joint venture will be structured to avoid surprises down the road.6:03 - Accounting joint ventures. Do you have joint control? The answer might not be so simple. Matt walks us through some important indicators.15:55 - Accounting by the joint venture. Historically, most joint ventures have recorded the assets or businesses they receive as contributions from investors at their carrying value. Matt explains some of the key accounting and financial reporting considerations at the joint venture level.21:50 - Accounting for an interest in a joint venture. Investors typically account for their interest in an accounting joint venture using the equity method of accounting. Listen as Matt highlights some of the accounting complexities investors in an accounting joint venture might encounter.27:20 - The FASB project. We discuss the FASB’s project on joint venture accounting and what changes we expect to see at the joint venture level.30:05 - Key takeaways. Matt encourages listeners to understand the key distinctions between commercial and accounting joint ventures and keep up to date with the FASB’s joint venture project.Want to learn more? Listen to our podcast episodes:Consolidation: A journey through the VIE modelConsolidation: Back to the basics with 5 things you need to knowApplying the equity method, Part IApplying the equity method, Part IIAnd read our Equity method investments and joint ventures guide.Matt Sabatini is a partner in PwC's National Office with nearly 20 years of experience helping clients and engagement teams navigate the accounting and financial reporting for complex transactions. He specializes in the accounting for M&A, corporate reorganizations, recapitalizations, joint ventures, and other investments.Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With nearly 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected].