Project Updates

The objective of this joint IASB/FASB research project was to develop a proposal for a project that would identify those situations in which fresh-start (new basis at fair value) recognition and measurement of all of an entity’s assets and liabilities would be appropriate. One commonly identified candidate for application of this approach would be a multiparty business combination or other new entity formation in which no single preexisting entity obtains majority ownership and control of the resulting new entity. Similarly, joint venture formations also are candidates for this accounting treatment. Related issues include the recognition and measurement of goodwill and other intangibles in combinations or other transactions accounted for by the fresh-start method.

Immediate Plans

This research project was removed from the Board's research agenda at the January 14, 2004 Technical Plan Board meeting.

Summary of Tentative Decisions

During the fourth quarter 2000, the Board discussed the recognition of a new basis of accounting in connection with the formation of a joint venture. The Board decided that a change in control over net assets from unilateral control by one entity to joint or shared control by that entity and one or more other entities should result in a new basis of accounting for those net assets in the financial statements of the jointly controlled entity. The Board also discussed gain recognition, as of the date of formation of a joint venture, in the financial statements of an investor that transfers an appreciated (or previously unrecognized) asset to the joint venture. The Board decided that an entity that exchanges appreciated (or previously unrecognized) assets for an equity interest in a joint venture should recognize a gain on the assets exchanged.

Board Meetings

History and Background

Prior to its designation as a potential IASB/FASB joint project, the Board, at its September 13, 2000 meeting, formally approved the initial focus of Business Combinations: Phase 2 on new basis accounting issues. The Board also approved a draft working principle to be utilized in the determination of the appropriateness of recognizing a new basis of accounting. The Board decided that the scope of the project should include the issue of gain recognition in the financial statements of the entity that has transferred control over net assets to a joint venture.