Accounting for Joint Ventures

Very Easy Intercorporate Investments Joint Ventures

XYZ Corp. and ABC Ltd. have decided to enter into a joint venture to develop a new technology product. In this joint venture, both companies will contribute resources and share in the profits and losses according to their ownership interests. As per the accounting standards, how should XYZ Corp. account for its investment in the joint venture in its consolidated financial statements?

XYZ Corp. should fully consolidate the financial results of the joint venture into its financial statements.

XYZ Corp. should account for its investment in the joint venture using the equity method.

XYZ Corp. should report its investment in the joint venture at cost in its financial statements.

Hint

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