In 2010, if Cinnamon is deemed to have control over Cambridge, it will most likely account for its investment in Cambridge using:
the equity method.
the acquisition method
B is correct. If Cinnamon is deemed to have control over Cambridge, it would use the acquisition method to account for Cambridge and prepare consolidated financial statements. Proportionate consolidation is used for JVs; the equity method is used for some JVs and when there is significant influence but not control.
Control: Acquisition method. - JVs: Proportionate consolidation. - JVs with significant influence but no control: Equity method
So my question is when should we use proportionate consolidation if it should not be used for control and not for JVs with significant influence?
Nope, the choice of method will be mainly based on whether u have significant influence or control over the entity which will decide what your investment will be classified as. Provided it is classified as Joint venture and the condition is post IFRS 9, propotionate consolidation will no longer be allowed. In others words, you would have to use equity method.
The curriculum only states that joint ventures are allowed to use proportionate consolidation only under “rare circumstances”. And yes, under IFRS 9, joint ventures are required to be accounted for using the equity method.