Gaap consolidating joint ventures
Power to control is determined by the party that owns more than 50 percent of the votes or potential voting rights.
The controlling partner has the ability to manage the financial and operating policies of an entity to obtain benefits.
The joint venture is its own enterprise, separated and set apart from any other business deals or interests in which the partnered individuals and companies are involved.
The equity method of accounting is used to determine the net income generated from the joint venture partnership in proportion to the size of a company's respective investment in the venture.
A joint venture is a temporary partnership between two or more firms in any particular business venture for a short period of time. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) determine acceptable accounting practices and reporting methods. GAAP, joint ventures usually must use the equity method of accounting.
Organizational structures of a joint venture are corporations, partnerships or undivided interests. Both base the need to consolidate an organization’s accounting books and reporting on the level of control of the parties in the joint venture. The exception for using the accounting equity method would be unincorporated industries that require proportionate consolidation.
The type of joint venture and investing parties will determine the best method for keeping the accounting books.Both the basic profit and diluted profit per common share remain unchanged after this restatement. 46, revised 2003 ( FIN 46R), Consolidation of Variable Interest Entities: Cam GSM Company Limited, a joint venture of Millicom in Cambodia, Comunicaciones Celulares S. VIEs are those entities possessing certain characteristics, which indicate either a lack of equity investment sufficient to cover the expected losses of the entity or the equity holders lack of characteristics consistent with holding a controlling financial interest. Information on the Groups share of revenues and operating expenses of VIEs contributed on a proportional basis under IFRS are included in Note 10 to the interim condensed consolidated financial statements. GAAP, Millicom is considered to be the Primary Beneficiary and consolidates its interests in the following VIEs: Cam GSM Company Limited, Comunicaciones Celulares S. A., a joint venture of Millicom in Guatemala and Telefonica Celular S. When an entity is a VIE the party whose interests absorb a majority of the entitys expected losses, receives a majority of its expected residual returns, or both, is deemed to be the Primary Beneficiary and must consolidate the VIE. The equity and proportional consolidation accounting methods are distinguished from one another by how a company's balance sheets and income statements report control in regard to joint ventures.
The equity method and the proportional consolidation method are accounting treatments used when two companies are part of a joint venture.
However, venture capital may use proportionate accounting for industries that require it, allowing separate financial statements presented by the controlling interest in the investment with subsidiaries’ financial statements.