Joint ventures are complex investment projects, a sort of strategic alliance whereby two or more businesses establish a new legally independent entity. The parties combined the resources necessary to achieve the goal set. They contribute fixed and current assets, know-how, skills and other intangible components to the new entity. They expect that the investment will generate the assumed return.

A venture may be assessed individually from the standpoint of each partner or from the perspective of the newly-established entity. In each of these cases, other results will be obtained and different recommendations as to the advisability of project execution.

Assessment of the effectiveness of this type of ventures is difficult. One of the reasons is that relevant decisions are taken based on incomplete information; contributions to joint ventures are often made in kind, and are hard to evaluate. Transfers are made between the entities undertaking joint ventures that are difficult to track and evaluate. Many effects of investment projects are not fully identifiable as they are determined by future conditions generated in the business environment and activities to be initiated in the future.

Sometimes the dominating contract party attempts to modify previously made contractual arrangements. This leads to changes in the distribution of planned cash flows over time and alterations to the venture's effectiveness.

The establishment of a joint venture is accompanied by numerous contingent provisions, among others, on the distribution of benefits resulting from the undertaking of a given activity, possibility of subsequent expansion of the activities, possibility and terms of earlier termination of the agreement, or the possible abandonment of the venture by one of the partners. Traditional evaluation methods relying exclusively on discounted cash flows have proven inadequate. A more comprehensive evaluation of joint ventures requires the application of an optional accounting method.