{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/805/60/#55-implementation-guidance-and-illustrations","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"805","topic_title":"Business Combinations","subtopic":"805-60","subtopic_title":"Joint Venture Formations","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"805-60-55-1","para":"55-1","html":"
This Section is an integral part of the requirements of this Subtopic. This Section provides illustrations that address the general application of accounting requirements for joint venture formations.
","snippet":"This Section is an integral part of the requirements of this Subtopic. This Section provides illustrations that address the general application of accounting requirements for joint venture formations.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d7311851663d3c7994c6adcc32a12aa8a1b313cbe7444f12c0fc53cfbe367e2","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7dec3b1c7763f4514a91eeddd91d5dbc9d140777988ae2f5256af2e5fe827988","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"805-60-55-2","para":"55-2","html":"
On January 1, 20X0, a newly formed corporation with no assets or liabilities, New Venture, receives contributions of a controlling financial interest in Business A (90 percent voting interest) from Venturer 1 and Business B (100 percent voting interest) from Venturer 2 and, in exchange, issues 50 common shares to each Venturer 1 and Venturer 2. Assume that New Venture has no other classes of equity or any other equity instruments outstanding before receiving the contributions. It is determined that New Venture first met the definition of a joint venture on January 1, 20X0. New Venture determines January 1, 20X0, to be its formation date.
","snippet":"On January 1, 20X0, a newly formed corporation with no assets or liabilities, New Venture, receives contributions of a controlling financial interest in Business A (90 percent voting interest) from Venturer 1 and Busines…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f05106ec277e93526855858662f20ab7ebb7b2bd254b573fc0d86ec81f4b1735","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-3","para":"55-3","html":"
In accordance with paragraph 805-60-30-2, but before consideration of any liabilities for share-based payments, New Venture determines that the fair value of the joint venture as a whole is $100 million including a noncontrolling interest (10 percent voting interest) in Business A that is owned by an outside entity. It also determines, in accordance with paragraph 805-60-30-2, that the formation-date fair value of the identifiable assets is $120 million, the fair value of the liabilities is $40 million, and the fair value of the noncontrolling interest in Business A is $5 million.
","snippet":"In accordance with paragraph 805-60-30-2, but before consideration of any liabilities for share-based payments, New Venture determines that the fair value of the joint venture as a whole is $100 million including a nonco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:93c98d7c088b97e693348a41ffb79a04172566931873207bf2d9b5968752860b","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-4","para":"55-4","html":"
Upon formation, New Venture exchanges replacement awards that require one year of postformation vesting for share-based payment awards of Business A for which employees had not yet rendered all of the required services as of the formation date. The fair-value-based measure of both awards (the original awards and the replacement awards) is $20 million at the formation date. When originally granted, the awards of the contributed business had a requisite service period of four years. As of the formation date, the contributed business’s employees had rendered two years’ service, and they would have been required to render two additional years of service after the formation date for their awards to vest. Accordingly, only a portion of the contributed business’s awards is attributable to preformation vesting.
","snippet":"Upon formation, New Venture exchanges replacement awards that require one year of postformation vesting for share-based payment awards of Business A for which employees had not yet rendered all of the required services a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8677e214f797b24e101f45706ae3422b1ad5e16d18f6233927f8b6548dcad465","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-5","para":"55-5","html":"
The replacement awards require only one year of postformation vesting. Because employees have already rendered two years of service, the total requisite service period is three years. For simplicity, assume that New Venture estimates that there will be no forfeitures of the replacement share-based payment awards. The portion attributable to preformation vesting equals the fair-value-based measure of the contributed business’s award ($20 million) multiplied by the ratio of the preformation vesting period (2 years) to the greater of the total service period (3 years) and the original service period of the contributed business’s award (4 years). Thus, $10 million ($20 million × 2 ÷ 4 years) is attributable to preformation vesting and, therefore, New Venture’s additional paid-in capital upon formation. The remaining $10 million is attributable to postformation vesting and therefore recognized as compensation cost in New Venture’s postformation financial statements in accordance with Topic 718 on stock compensation.
","snippet":"The replacement awards require only one year of postformation vesting. Because employees have already rendered two years of service, the total requisite service period is three years. For simplicity, assume that New Vent…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5745e6f9cc900a6dd5f91615c3d22d6c72507259e035884cfd10fe15e06b0544","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-6","para":"55-6","html":"
New Venture applies the guidance in Topic 718 to determine whether the share-based payments should be classified as liabilities or equity.
","snippet":"New Venture applies the guidance in Topic 718 to determine whether the share-based payments should be classified as liabilities or equity.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8ebeb29b79b38e93b5fce9345a0abeda0ea3be3f4b08384afa1f41bef471e30","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-7","para":"55-7","html":"
If New Venture determines that the replacement share-based payment awards are classified as liabilities, then total liabilities will equal $50 million ($40 million + $10 million). For simplicity, when taking the share-based payment liabilities into account, the fair value of New Venture as a whole is $90 million ($100 million – $10 million).
","snippet":"If New Venture determines that the replacement share-based payment awards are classified as liabilities, then total liabilities will equal $50 million ($40 million + $10 million). For simplicity, when taking the share-ba…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bb86eb3bb191b272c300ee74691cbf0ba62a5d116cbb532deced60f372710448","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-8","para":"55-8","html":"
New Venture calculates goodwill as follows (in millions), consistent with the guidance in paragraph 805-60-30-2. The formation-date fair value of the joint venture as a whole is equal to the fair value of 100 percent of the joint venture’s equity (net assets) immediately following formation (including any noncontrolling interest in the net assets recognized by the joint venture).
  • Fair value of New Venture as a whole (including $5 noncontrolling interest) $90 Less: Net fair value of identifiable assets and liabilities recognized ($120 assets − $50 liabilities) (70) Goodwill recognized by New Venture at formation date $20
","snippet":"New Venture calculates goodwill as follows (in millions), consistent with the guidance in paragraph 805-60-30-2. The formation-date fair value of the joint venture as a whole is equal to the fair value of 100 percent of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:17831ea7ddb09cb7d55d8a794fe64d9de3e7f3211e1357168f2879d6b4150af3","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-9","para":"55-9","html":"
New Venture calculates additional paid-in capital as follows (in millions).
  • \"Net assets recognized by New Venture, excluding share-based payment liabilities ($120 identifiable assets – $40 liabilities + $20 goodwill)\" $100 Less: The fair value of noncontrolling interest in business contributed to New Venture (5) Less: The fair value of preformation vesting replacement share-based payments classified as a liability (10) Additional paid-in capital recognized by New Venture at the formation date $85
","snippet":"New Venture calculates additional paid-in capital as follows (in millions).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11fbcfaeac4bff7c58c5f6c5e7c24f956ebf7d77c3c32d15a1ac87d37baa9e11","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-10","para":"55-10","html":"
New Venture records the following entry at the formation date (in millions).
  • Identifiable assets recognized $120 Goodwill 20 Liabilities recognized $40 Noncontrolling interest 5 Share-based payment liability (preformation vesting) 10 Additional paid-in capital 85
","snippet":"New Venture records the following entry at the formation date (in millions).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3ec549d1887f533f95339126d34cd666c558cb59a477d75c19db98c810044695","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-11","para":"55-11","html":"
If New Venture determines that the replacement share-based payment awards are classified as equity, then total liabilities will equal $40 million and the fair value of New Venture as a whole is $100 million.
","snippet":"If New Venture determines that the replacement share-based payment awards are classified as equity, then total liabilities will equal $40 million and the fair value of New Venture as a whole is $100 million.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3982dbe66bb545a4a8821a948656574ab8b4013657ea821b785dbce3f236ec31","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-12","para":"55-12","html":"
New Venture calculates goodwill as follows (in millions), consistent with the guidance in paragraph 805-60-30-2. The formation-date fair value of the joint venture as a whole is equal to the fair value of 100 percent of the joint venture’s equity (net assets) immediately following formation (including any noncontrolling interest in the net assets recognized by the joint venture).
  • Fair value of New Venture as a whole (including $5 noncontrolling interest) $100 Less: Net fair value of identifiable assets and liabilities recognized ($120 assets − $40 liabilities) (80) Goodwill recognized by New Venture at formation date $20
","snippet":"New Venture calculates goodwill as follows (in millions), consistent with the guidance in paragraph 805-60-30-2. The formation-date fair value of the joint venture as a whole is equal to the fair value of 100 percent of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e2d771837ba020c5d9297864762447c45116c5f58f86b3faf6ac7f5e8f6c71a","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-13","para":"55-13","html":"
New Venture calculates additional paid-in capital, excluding additional paid-in capital attributable to share-based payments, as follows (in millions).
  • \"Net assets recognized by New Venture, excluding share-based payment liabilities ($120 identifiable assets – $40 liabilities + $20 goodwill)\" $100 Less: The fair value of noncontrolling interest in business contributed to New Venture (5) Less: The fair value of preformation vesting replacement share-based payments classified as equity (10) Additional paid-in capital recognized by New Venture at the formation date (excluding additional paid-in capital attributable to preformation vesting share-based payments) $85
","snippet":"New Venture calculates additional paid-in capital, excluding additional paid-in capital attributable to share-based payments, as follows (in millions).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0b0a1905313c450557cf358dd9b0b36890380c60c0b272ef18535e447ea16f4","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},{"citation":"805-60-55-14","para":"55-14","html":"
New Venture records the following entry at the formation date (in millions).
  • Identifiable assets recognized $120 Goodwill 20 Liabilities recognized $40 Noncontrolling interest 5 Additional paid-in capital—share-based payments (preformation vesting) 10 Additional paid-in capital 85
","snippet":"New Venture records the following entry at the formation date (in millions).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db1338b1548858a4763818e2f1cffcbe13b344583eb8c1eaad9f7c62f21cae86","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a713323b78ca54ebf682a5aa007af0ba19e98bfed0a1dc95f59513469a9c3e3f","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b6f6f4e70059897d5e132e3e6706ea3294312adeb353b162a8bc34f8e702fb3","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b6f6f4e70059897d5e132e3e6706ea3294312adeb353b162a8bc34f8e702fb3","downloaded_from":"2026-09-10T01:26:12.163Z","last_downloaded_at":"2026-09-10T01:26:12.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476182","source_sha256":"10e6adc9912b7dc7af4b73d52c2537fd4f79669080a840c5cc04bdf05728fd7d"}}