In a joint venture, two or more parties combine resources for a defined purpose, such as building a plant, developing a product, entering a new market or constructing a large facility. They share the investment, the risk, the decisions and the profits according to the agreement. It is often set up as a separate legal entity, but can also be a contract-based partnership.
Partners use joint ventures to combine strengths, such as one party's technology and another's local access, to spread the cost of large projects and to limit their own exposure.
Accounting depends on control. If one partner controls the venture, it consolidates the results. If control is shared, each partner usually reports its share using the equity method, as one line on its income statement and one on its balance sheet. This keeps the venture's assets and debts largely off the partner's balance sheet, which can hide exposure.
Read the venture's governance terms, any guarantees or funding promises that the partners made and how the accounts treat it.