Accounting for Joint Venture Interests

Hard Intercorporate Investments Joint Ventures

ABC Corporation and XYZ Limited have established a joint venture named Tech Innovations LLC to develop advanced software solutions for the healthcare sector. ABC Corporation holds a 60% interest in the joint venture, while XYZ Limited holds the remaining 40%. Under the agreement, both parties contribute capital and share profits and losses in proportion to their ownership interests. In addition, the joint venture has a management board comprising equal representatives from both companies.

Assuming the joint venture qualifies as a joint operation under IFRS 11, how should ABC Corporation account for its interest in Tech Innovations LLC in its consolidated financial statements?

ABC Corporation should proportionately consolidate Tech Innovations LLC and include its share of the joint venture's assets, liabilities, revenue, and expenses in its financial statements.

ABC Corporation should recognize its interest in Tech Innovations LLC using the equity method and report its share of the joint venture's net income in its income statement.

ABC Corporation should account for its investment in Tech Innovations LLC at fair value and recognize changes in fair value in other comprehensive income.

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