No joint liability unless agreed each acts as an

agreed. No joint liability unless
agreed.
Each acts as an agent for the
others, making each partner
jointly an severally liable
finance Each arranges for its share of the
required finance. No internal funds
as the entire product is taken and sold
by the participants.
Can be internally financed if
profits are retained. External
finance can be arranged by the
partnership.
taxation Each includes in its own tax return its
share of income and deductions
attributable to the share of the
venture’s production.
A partnership tax return is lodged.
Each partner then includes its
own share of the partnership’s
taxable income in its own return.
Constituent
documents
Being a contractual arrangement,
extensive documentation is required
to specify the rights and obligations of
each participant.
No documentation is required.
Management
and control
Control over strategic financial and
operating decisions is exercised
jointly by the participants. Manager
may be appointed to act as agent for
each participant.
Management matters are agreed
upon , control is usually exercised
in proportion to capital
contributions.
Accounting
reports
Usually special-purpose reports are
prepared by the manager for the
participants. Accounting reports will
show the costs of production, costs of
assets acquired and any liablilities
incurred on behalf of the participants.
The partnership statements of
comprehensive income and
financial position are drawn up
as part of internal management
responsibilities.
Joint venture Accounting Treatment
Jointly
controlled
operation/ass
et
para.15/para.
21
Venturer to recognise its interest in each asset
employed, each liability arising, expenses
arising and revenues from the sale of its share
of the output of the joint venture. (Otherwise
known as the line-by-line method)
Jointly
controlled
entity Para
30
Venturer has the choice to line by line method
or the equity accounting method

close to perfect but is likely to be economically sub-optimal in other cases . 2 preferred by management because of the relative appeal of the equity
method of accounting . The equity method has the same statement of comprehensive income effects as a proportional consolidation
without requiring any additional liabilities to be recognised in the statement of financial position.
Evaluation of the line by line method: Against: A venturer’s interest in a asset does not meet the definition of asset due to control issues. Only controls an interest in an asset.
Can distort the venturer’s financial statements as controlled assets are combined with joint venture assets and effects ratios. For : imposes financial performance of joint venture
into venturer’s financial statements. For example, total cost of production for a process. Reflects the substance and economic reality of a venturer’s interest in a joint venturer.