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. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Consolidation

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

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

    A general term used to refer to the consolidation of companies. ...
  5. Acquisition Premium

    The difference between the estimated real value of a company ...
  6. Conglomerate Merger

    A merger between firms that are involved in totally unrelated ...
Related Articles
  1. Bonds & Fixed Income

    8 Reasons M&A Deals Fall Through

    Mergers and acquisitions can mean big success. But what about all the deals that fall through?
  2. Fundamental Analysis

    Accretion / Dilution Analysis: A Merger Mystery

    This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table, but should you sign the papers?
  3. Options & Futures

    Parents And Spinoffs: When To Buy And When To Sell

    Spinoffs can create great investing opportunities, but there's a time to stick around and a time to jump ship.
  4. Entrepreneurship

    Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.
  5. Options & Futures

    What Makes An M&A Deal Work?

    Do you know why companies merge? Here we'll take a look at three successful company acquisitions and why they succeeded.
  6. Fundamental Analysis

    What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between the two terms.
  7. Fundamental Analysis

    Should companies break out accounts receivables into subledgers?

    Find out why every company that sells on credit should break down its accounts receivable into individual customer subsidiary ledgers, or subledgers.
  8. Bonds & Fixed Income

    What is the difference between yield to maturity and the yield to call?

    Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing process.
  9. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  10. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center