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adv acct5 - Accounting for Joint Ventures Cheri L Reither...

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Accounting for Joint Ventures Cheri L. Reither and Ronald W. Lott1 Financial Accounting Standards Board Consolidations and Related Matters In January 1982, the Board added to its agenda a project on consolidations and related matters. The project is intended to cover all aspects of accounting for affiliations between entities along with several other matters that raise similar, or potentially related, issues about financial statements. The project was undertaken in response to numerous questions about consolidation policy and procedures that the American Institute of Certified Public Accountants, the Securities and Exchange Commission and others brought to the Board's attention during the late 1970s. The project is divided into five parts: consolidation policy and procedures, disaggregated disclosures, unconsolidated entities, new basis accounting, and similar matters for not-for-profit entities. To date, consolidation policy and procedures and disaggregated disclosures have been the active phases of the project. An October 1995 Exposure Draft was issued for consolidations policy and procedures, while early 1996 is the projected date of an Exposure Draft for disaggregated disclosures. The next active phase is to be unconsolidated entities. The unconsolidated entities phase of the consolidations project is intended to address presentation in the investor's financial statements of investments in entities that do not qualify for consolidation as defined in the consolidation policy and procedure's part of the project. In that regard, the Board will be considering the accounting for investments in joint venture and other types of investments that presently are accounted for according to the provisions of APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. Current Accounting for Joint Ventures A joint venture may be organized as a corporation (corporate joint venture), as a partnership, or as undivided interests under which each investor owns an undivided interest in each joint venture asset and is liable for its share of each joint venture liability. Although Opinion 18 defines a corporate joint venture, there is not yet a " generally accepted" definition of a joint venture that includes unincorporated entities as well. According to Opinion 18 a corporate joint venture is: ... a corporation owned and operated by a small group of businesses (the "joint venturers") as a separate and specific business or project for the mutual benefit of the members of the group ....
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