Joint venture
A separate entity controlled jointly by two or more partners who share its costs, risks and returns. Each venturer usually accounts for its share using the equity method.
Where you will meet it
Joint venture appears in 5 learning outcomes on the CFA syllabus. A few of them:
- Set out how IFRS classifies, measures and requires disclosure of: (1) financial asset investments; (2) associates; (3) joint ventures; (4) business combinations; (5) special purpose entities and variable interest entities
“Significant influence, usually 20% to 50%, means the equity method for associates, and joint ventures also use it.”
- Set out the kinds of corporate restructuring and why issuers undertake them
“Investment actions add to the company: minority equity investments, joint ventures and acquisitions.”
- Explain the key characteristics of investing in private real estate
“Investors choose among property types (office, retail, industrial and logistics, multifamily, hotels) and among forms of ownership: direct holdings, private funds, joint ventures, or debt such as commercial mortgages.”
- Analyse how the choice of accounting method for intercorporate investments changes financial statements and ratios
“Proportionate consolidation, not permitted for joint ventures under IFRS or US GAAP (which use the equity method) but useful to analysts as a comparison, adds a share of each line.”
See also
Practise it
Practise joint venture until it is automatic: questions that explain every wrong option.
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