Lecture Topic 12 - Lecture Topic 12: Interest in Joint...

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Lecture Topic 12: Interest in Joint Ventures Practice questions 3. Discuss the key d ifference(s) between a joint venture op eration and a joint venture entity. How do these differences affect the accounting for these joint ventures? A jointly controlled operation , as per para 13 of AASB 131, involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity. As there is no investment in an entity, the equity method of accounting cannot be used. As per para 15 of AASB 131, the accounting for jointly controlled operations involves recognition in the financial statements of the venturer the assets it controls, the liabilities it incurs, the expenses it incurs and its share of income from the sale of output. A jointly controlled entity involves the establishment of a corporation, partnership or other entity in which each venturer has an interest. Venturers may share profits or outputs. According to para 38 of AASB 131, a venturer shall recognise its interest in a jointly controlled entity using the equity method. 4. Distinguish between a subsidiary, an asso ciate, a joint venture and a partnership. Why are different accounting methods required for each of these entities? Subsidiary : a parent entity controls the financial and operating policies of a subsidiary. Associate : an investor has significant influence over the policies of an associate Joint venture : a joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Partnership : would normally be a joint venture, in particular, a jointly controlled entity. Accounting for subsidiaries requires the parent to apply the consolidation method. There are no effects on the individual records of either the parent or the subsidiary. The consolidated statements include all the assets, liabilities and income of the subsidiary on a line-by-line basis. This method is required for such relationships because of the
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This note was uploaded on 01/10/2012 for the course FINS 3616 taught by Professor Curry during the Three '10 term at University of New South Wales.

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Lecture Topic 12 - Lecture Topic 12: Interest in Joint...

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