Continental Construction Company

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  • Topic: Strategy map, The Ventures, Third generation balanced scorecard
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  • Published : May 15, 2013
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Continental Construction Company

Re:Joint Venture Issues
I have provided a list of issues based on the information provided by Rakesh Pumi regarding the Connector project to form a jointly controlled entity Continental construction Company (CCC), and I have included my analysis and recommendations where applicable. Accounting for Joint Ventures

IAS 31 Interests in Joint Ventures
The following publicly traded companies: Marble Construction Company (Marble), Norman Construction, Inc. and Webster Inc. (Webster) entered into a joint venture agreement which established joint control over the economic activities of Continental Construction Company (CCC). The companies are considered to be venturers and CCC is considered to be a jointly controlled operation.

The standard permits the joint venture the option of reporting using proportionate consolidation (IAS 31.33) or the equity method (IAS 31.46). Both these options require detailed disclosure in the financial statements.

Proportionate Consolidation
Under the proportionate consolidation, the statement of financial position of the venture will include their portion of assets and liabilities in the joint venture. Similarly, the statement of comprehensive income of the venture will include their portion of income and expenses in the joint venture. There are two options for the financial statements: •On a line by line basis – This method would

Separate line items

Equity Method
Under the equity method, the joint venture will be initially recorded at cost and subsequently adjusted to reflect the venture’s share of net profit or loss in the joint venture.

The venture is required to provide a separate set of financial statements with the following information relating to the joint venture: •Contingent liabilities
Commitments
Listing and description in significant joint ventures and proportion of ownership

CCC will stop using the equity method when the joint venture...
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