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. 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?

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center