Joint Ventures

Question 1

Joint Ventures Definition

Answer 1

• Association of two or more entities exercise joint control over undertaking for profit set up for limited purpose/time/both
• no one party has unilateral control
• record at cost

Question 2

How recorded if Corporate Joint Venture

Answer 2

1. Variable Interest Entity: investor will consolidate joint venture if primary beneficiary
2. Not Variable Interest Entity: Investor accounts/reports investment in corporate joint venture using equity method
3. Single Investor able to unilaterally control and not Var Int: controlling investor consolidate joint venture

Question 3

How recorded if Partnership Joint Venture

Answer 3

Acct for investment w/ adjustments (equity like) for any inter company items
> Intercompany profit/loss included in asset resulting from transactions b/w investor/partner and partnership would be eliminated
> Investment acct of Investor: increased/decreased for investor’s share of joint venture profit/loss after eliminated intercompany items
> Investment acct of investor decreased for distributions received from partnership joint venture