Hi all… Before everybody jumps on me…just want to say that I searched for threads regarding my question (coming up)…but I didn’t find what I was looking for…so here goes… In the schweser text it CLEARLY states (Book 2 Pg 140) that “proportionate consolidation is not a proviion of U.S.GAAP, although it has been adopted for use nder International Accounting Standards (IAS).” CFAI Text - Vol 2 Pg 43 Second last para at the bottom of the page: “Neither proportionate consolidation not the expanded equity method is widely used; in the United States, it is unclear whether these methods are permitted under GAAP.” Schweser Q Bank ID 28488: Proportionate consolidation is: A) recommended by U.S GAAP for jointly controlled entities, but may or may not be permitted under IASB GAAP. B) recommended by IASB and U.S. GAAP for jointly controlled entities. C) not permitted under IASB or U.S. GAAP, even for jointly controlled entities. D) recommended by IASB GAAP for jointly controlled entities, but may or may not be permitted under U.S. GAAP. Correct Answer - Well I was looking for an answer that said “Recommended under IASB, but not under US GAAP”… unforunately…there was no choice E…
D? go with the CFAI text obviously.
yeah…seems kinda obvious when i’ve got the descriptions up there… my point is…what is choice E was an option…and you’d only studied from schweser (my case) why the heck does Schweser have conflicting stuff with the CFAI… ?? In fact…they are contradicting themselves…because the qbank answer doesn’t match with schweser’s description in the book!!! arghh!! it’s starting to get me worried…and wondering if i should’ve gone through both the texts…to make sure i’d covered small bumps like these!!!
That’s the precise reason why I’m not using Schweser as my main text. Just reduces a lot of noise.
ruhi22 Wrote: ------------------------------------------------------- > That’s the precise reason why I’m not using > Schweser as my main text. Just reduces a lot of > noise. it’s a bit late for me to change my direction now…anyway…as long as we catch as many of these as possible in the next…what 50 something days?!
US GAAP uses the equity method for joint interests, however as an analyst its prudent to adjust using the proportionate consolidation should you feed feel the equity method doesn’t capture the relationship b/w the two parties. (ie. one party buys its inventory from the other).
I don’t like how the question is phrased since proportionate consolidation is not allowed in US GAAP. However, D is still the best option.
With questions like these, I usually go with the best answer I can find even if I am not 100% sure if it is correct. A) We know it is clearly not recommended by GAAP so not A. B) Still not recommended by GAAP, not B. C) We know it is permitted under IASB, so not C. D) I was not sure but since the others are clearly wrong, D seems plausible.
D I haven’t read the question, but everyone else is putting that so it must be of some use to somebody.
Yep. That’s definitley D)
D prportionate consolidation is recommended by IASB, not permitted under US GAAP but for analysis, one could utilize for joint venture analysis.
DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD A?
Sorry very late but this has to be D by the trick of elimination for MCQ’s