Difference between Joint Venture and Parent/Subsid.

Hanley · 22-04-2008 07:16PM #1

Quick question...

Very basically, is the main difference between a joint venture between two parties and a parent/subsidiary relationship that the former requires the creation of a new group while the venturers may still continue on with their other businesses?

Leon11 · 22-04-2008 11:35PM

If by creation of new group you mean consolidating the accounts then ye, just lump everything together and eliminate all inter-company transactions, balances etc.

For JV just put your share of assets/profits through your B/S and I/S. There's no consolidation issues at all.

Go to http://www.iasplus.com/standard/standard.htm and look up IAS 27 and 31 for further info, it's summarised nicely.

Hanley · 22-04-2008 11:52PM

Thanks man. I know all about the creation of a new groups and consolidation. I was just unclear as to how JV's were different.

I had figured the difference was it's not the consolidation of two seperate business into one, but the creation of a NEW business venture by two seperate entities who retain their own identity and balance sheets and just take their interests in the JV into their own accounts.

And obviously whether or not a new BS for this JV is required is dependent on what time of JV we're talking about.

Leon11 · 23-04-2008 12:07AM

Ye that's pretty much the gist of it from what I can remember, we got stung with consol cashflows this semester:( Time for me to learn I think:D

MartMax · 23-04-2008 12:30AM

i always remember this key - control and influence over the entity.

joint-venture normally implies equal control and ownership.

Difference between Joint Venture and Parent/Subsid.

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