joint ventures

Question 1

what is a joint venture

Answer 1

2 or more entities exercising joint control for a limited purpose

Question 2

how is it established

Answer 2

by agreement or contract

Question 3

how to record contribution of assets to a joint venture

Answer 3

as an investment at carrying value of the assets on its books at the time of contribution

dr. investment in
cr. land

Question 4

does the accounting by the investor depend on the form of the JV (corporation/partnership) and the relationship between the investor and the investee

Answer 4

YES.

Question 5

the accounting under corporation where JV is variable interest entity and investor is primary beneficiary

Answer 5

investor consolidates JV

Question 6

the accounting under corporation when JV not VIE or investor and not primary beneficary

Answer 6

use equity method

Question 7

the accounting under corporation if single investor available to unilaterally control and not VIE

Answer 7

controlling investor will consolidate JV

Question 8

the accounting under partnership

Answer 8

intercompany profits/losses eliminated and investor account would increase or decrease for profits/losses

Question 9

IFRS difference

Answer 9

recognize gain/losses (fair value vs carrying value)

other methods: equity method and proportionate consolidation method. whatever method chosen, must be consistent

Question 10

what is the proportionate consolidated method

Answer 10

recognize assets, liabilities, revenues and expenses of JV.