Consolidating subsidiary under equity method Camesexy wep
Joint ventures offer an expedient way for companies and individuals to pool knowledge, expertise and resources to accomplish a potentially lucrative deal while decreasing each party's exposure to risk.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.Give it a read to learn more about the equity method of accounting.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.Some countries require the lower of cost or market ("LCM" or "LOCOM") method of periodically revaluing equity investments, rather than mark-to-market.
Equity investments accounted for using the cost method must be periodically marked-to-market (fair value) if the securities have readily available market prices, creating unrealized gains and losses.
Under this method, we treat the investment as a simple financial investment initially recorded at cost on the investor's balance sheet.
Classification of the investment depends on the intent of the investor.
Moreover, in practice investors may possess an equal number of shares (50-50 percent or near).
This method, also known as the fair value method, applies when the investor does not have significant influence over the investee (as measured by voting power).