Can someone please provide me with a quick few bullet point overview of Proportionate consolidation and how it compares to Equity Method/Acquisiton Method. I know it’s used only under IFRS when a company owns 50% of a joint venture (would more than 50% also count?
Thanks in advance!
Instead of adding 100% of the subs accounts to yours, you add only the percent that you own.
Therefore, there’s no minority interest.
The values will lie between those for the equity method and the (100%) acquisition method.
just remember, net income will be the same under all methods, equity, assets and liabilities will be from lowest to highest, equity method, proportionate consolidation, acquisition method.
Is there anything tricky where we might use market value versus book value? Would you ever aquire a JV venture and use proportionate consolidation?
I doubt this would come up on an exam but I followed a publically traded company who aquired a competitor who’s main operations was a 50% JV with a third party. They account for this JV using the equity method but amortize the excess fair-value quarterly and was curious how they would treat this if the company they aquired originally accounted for the JV under the proportinate consolidation method?