07 Joint Venture

Question 1

In what forms may a joint venture be established?

Answer 1

1 By agreement or contract alone;

2 As a corporation;

3 As a partnership;

4 As an undivided interest entity.

Question 2

Under GAAP, what are the methods of accounting that may be used to report an investment in a joint venture?

Answer 2

Equity method or consolidation basis for a corporate joint venture.

Partnership basis, with certain equity method-like adjustments, for a partnership.

Question 3

What are the major differences between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) in accounting for joint ventures?

Answer 3

Contributions of nonmonetary assets:
A U.S. GAAP at carrying value;
A IFRS at FV for share not owned by contributing entity, with gain/loss recognized.

2 Methods of Reporting:
B U.S. GAAP - primarily using equity method; partnership or full consolidation basis when appropriate;
B IFRS - equity method or proportionate consolidation.