Par-Mac Corporation is a joint venture equally controlled by Parker Company and Macintosh Company. Which method should Macintosh use to account for its ownership interest in Par-Mac according to U.S. Generally Accepted Accounting Principles (U.S. GAAP), and which method recommended for Parker under International Financial Reporting Standards (IFRS)?
A) |
Consolidation method |
Proportionate consolidation method | | |
B) |
Equity method |
Proportionate consolidation method | | |
C) |
Equity method |
Consolidation method | | |
When a firm that reports under U.S. GAAP has joint control over another entity, the equity method of accounting is required. Under IFRS, the proportionate consolidation method is the recommended method; however, the equity method is also permitted. |