Companies within the pharmaceutical industry often engage in collaboration to link up the patents or licenses held by one company and the production or distribution capability of another.

This often involves the use of joint ventures where the owners of the joint venture have shared control over it.

The accounting for joint ventures uses the equity method.

This results in the investing company showing a single line on their balance sheet within non-current assets, which represents their ownership of the net assets of the joint venture.

Within the income statement.

Again, a single line is used to show the owner's proportion of the joint ventures net income.

Any increase in retained earnings will also lead to an increase in the balance sheet asset.

If the joint venture pays a dividend, the cash balance of the investing company increases and there is a corresponding decrease in the non-current asset representing the investment in that joint venture.

Taking together the balance sheet value for the investment in the joint venture will either increase through the recognition of the owner's share of the joint ventures, net income and decrease when dividends are received.