Posted Wednesday, October 18, 2023
New regulatory moves aimed at greater transparency and consistency in the structure of joint venture valuations may impact how hospices approach these partnerships.
The Financial Accounting Standards Board (FASB) recently introduced a new rule that will require newly formed joint ventures (JVs) to disclose the net value of each participating asset at the onset of solidifying these deals. The requirement will take effect for all JVs with a formation date on or after Jan. 1, 2025.
A main driver behind this change in standard is that much diversity exists in how and when JVs currently assess and disclose the value of their individual and combined assets, the agency stated. The FASB is a private organization recognized by the U.S. Securities and Exchange Commission’s (SEC) as the national standard-setter for accounting among public companies, including health care providers.
“To reduce diversity in practice and provide decision-useful information to a joint venture’s investors, the [FASB] Board decided to require that a joint venture apply a new basis of accounting upon formation,” the agency stated in a report. “By applying a new basis of accounting, a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).”
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