Perspective and Issues
Definitions of Terms
Concepts, Rules, and Examples
Joint operating activities
Accounting for transactions with unrelated third parties
Accounting for transactions between participants
Matters for which guidance is not provided
A collaborative arrangement (sometimes referred to in practice as “line-item” joint ventures or “virtual” joint ventures) is a contractual agreement between two or more parties (participants) to jointly conduct business activities for their mutual benefit without the formation of a separate entity in which to conduct the activities. These types of arrangements are commonly used for such purposes as producing motion pictures; designing and developing hardware and/or software; or developing new pharmaceutical drugs. Determining the proper accounting treatment for the various activities included in these endeavors is the subject of Accounting Standards Codification (ASC) 808, Collaborative Arrangements.
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The following terms are from ASC 808-10-20.
Collaborative arrangement. A contractual agreement that involves a joint operating activity. These arrangements involve two (or more) parties ...