Question

In US GAAP, corporate joint ventures must be accounted for using one of three methods. What are these methods? What method must a joint venturer use to account for its interest (investment) in a joint venture under IFRS?

Answer 1

In US GAAP, a corporate joint venture may be accounted for using the equity method, fair value option, or cost method. Under IFRS, a joint venturer must use the equity method for accounting for its interest in a joint venture.

Step-by-step explanation:

In US GAAP, corporate joint ventures can be accounted for using one of three methods: the equity method, the fair value option, and the cost method. Under the equity method, a joint venturer recognizes its share of the joint venture’s net income or loss in its financial statements. The fair value option means that the investment is reported at fair value with changes in fair value recognized in income. With the cost method, the investment is reported at the historical cost.

Under IFRS, a joint venturer must use the equity method to account for its interest in a joint venture. The IFRS does not allow for the use of the fair value option or the cost method for joint ventures, as it emphasizes the investor's share of the venture and its results reflected in the investor's financial statements.