Can anybody explain the difference for me in just 2 sentences?
Equity-cost of investment shows up on balance sheet, each year you increase it by the proportionate amount in NI minus dividends Proportionate-not allowed anymore under either US GAAP or IAS (joint ventures IAS allows it) just add up all the book values for all the accounts on the balance sheet.
equity- better ratios like ROA, D/E, etc. prop consolidation ratios better than full consolidation NI and equity- SAME ON BOTH prop consolidation- good IFRS, no good US GAAP right?
^ crap nibs is right i think on the IFRS
Proportionate consolidation is not a provision of US GAAP, but its has been adopted under IAS
PC: Add everything to balance sheet with a deduction for ‘Minority Interest’ (for the % that you don’t take over). EM: Add only the % that you buy to balance sheet as ‘Investment in Company X’.
Proportionate is not allowed under US GAAP, but is a good method for analysts. Proportionate is allowed under IAS for Joint ventures. It is pooling that is not allowed under either and is what nablita was talking about.
Ah, thanks for clearing that up. I am about to call it quits for the day.
Holy smokes there is a lot of wrong info on this thread. The method SanFranMatt described is full consolidation. The proportionate does not include Minority Interest, only take the % you own of each A & L, etc.
and remember on the Prop Consolidation, remove the intercompany amounts from the subs financials, THEN multiply by the % ownership.