Proportional Consolidation

AAA

DEFINITION of 'Proportional Consolidation'

In accounting for joint ventures, a method of including items of income, expense, assets and liabilities in proportion to the firm's percentage of participation in the venture. The proportional consolidation method was initially favored by IFRS accounting standards, though it also allows use of the equity method. Under U.S. GAAP, a firm's interest in a joint venture is accounted for using the equity method. Recently, IFRS standards have begun to converge with those of GAAP on this matter.

INVESTOPEDIA EXPLAINS 'Proportional Consolidation'

The issue of accounting for joint ventures has been a matter of ongoing discussion in the movement to resolve significant differences between IFRS and U.S. GAAP. Proponents of proportional consolidation argue that this method provides more detailed information, since it breaks out the performance of the joint venture interest into its component parts. The equity method is favored by others, who feel that it is a simpler and more straightforward approach of accounting for outside investments.



RELATED TERMS
  1. Consolidation

    In technical analysis, the movement of an asset's price within ...
  2. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  3. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  4. Conglomerate Merger

    A merger between firms that are involved in totally unrelated ...
  5. Equity Method

    An accounting technique used by firms to assess the profits earned ...
  6. Acquisition

    A corporate action in which a company buys most, if not all, ...
Related Articles
  1. 8 Reasons M&A Deals Fall Through
    Bonds & Fixed Income

    8 Reasons M&A Deals Fall Through

  2. Accretion / Dilution Analysis: A Merger ...
    Fundamental Analysis

    Accretion / Dilution Analysis: A Merger ...

  3. Parents And Spinoffs: When To Buy And ...
    Options & Futures

    Parents And Spinoffs: When To Buy And ...

  4. What Makes An M&A Deal Work?
    Options & Futures

    What Makes An M&A Deal Work?

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center