Joint Venture
A business arrangement where two or more parties create a separate entity to pursue a shared objective.
What is Joint Venture?
A joint venture (JV) is a business arrangement in which two or more parties agree to pool resources for a specific project or business activity, often by creating a new legal entity in which each party holds an ownership interest. Each party contributes capital, assets, expertise, or technology, and shares in the profits, losses, and control of the venture according to the agreed ownership split. Under US GAAP (ASC 323) and IFRS (IAS 28), a venturer with significant influence (typically 20–50% ownership) accounts for its JV investment using the equity method. Joint ventures differ from full mergers because each party retains its separate legal identity and the JV is typically time-limited or purpose-specific.
Example
Sony and Ericsson formed the Sony Ericsson joint venture in 2001 to compete in the mobile phone market, with each company contributing 50% equity and combining Sony's consumer electronics expertise with Ericsson's telecommunications technology. Each partner accounted for its 50% stake using the equity method, recognizing its proportionate share of JV earnings. Sony eventually acquired Ericsson's 50% stake in 2012 to gain full control.
Source: Investopedia — Joint Venture