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. Acquisition Premium

    The difference between the estimated real value of a company ...
  3. Consolidation

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

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

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

    Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.
  6. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  7. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.
  8. Technical Indicators

    What is a good gearing ratio?

    Understand the meaning of the gearing ratio, how it is calculated, the definition of high and low gearing, and how they reflect relative financial stability.
  9. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.
  10. Fundamental Analysis

    What is a bad interest coverage ratio?

    Understand how interest coverage ratio is calculated and what it signifies, and learn what market analysts consider to be an unacceptably low coverage ratio.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center