Joint venture formation and enterprise combination accounting

Criteria for a Japanese enterprise combination to be treated as a JV Formation

This article consists of a flowchart which applies the criteria used to determine whether or not an enterprise combination is treated as a JV Formation transaction under Japanese accounting standards.  The background to this treatment and the related standards is explained in this article.

Where all of the conditions shown in flowchart are met the enterprise combination transaction does not have to apply the default purchase accounting rules but rather treats any assets and liabilities transferred into the JV entity concerned in the enterprise combination as transferred at their appropriate book value.

A common point in the criteria is that they are aimed at identifying transactions where independent parties agree to establish a co-operative joint venture in which one party does not have exclusive control.  Typically this may be a joint research project or similar arrangement.

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