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Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?

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  • Kazbi Soonawalla

Abstract

Unlike US GAAP, accounting principles in Canada and the UK require disclosure of disaggregated components of joint ventures and associates. Using comparative analysis of Canadian, UK and US data, this study investigates the potential loss of forecasting and valuation relevant information from aggregating joint venture and associate accounting amounts. Findings show that aggregating joint venture and associate investment numbers, and aggregating joint venture revenues and expenses, each leads to loss of forecasting and valuation relevant information. Thus, current US accounting principles likely mask information that financial statement users could use to predict future earnings and explain share prices.

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  • Kazbi Soonawalla, 2006. "Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3‐4), pages 395-417, April.
    • Handle: RePEc:bla:jbfnac:v:33:y:2006:i:3-4:p:395-417
    DOI: 10.1111/j.1468-5957.2006.00609.x
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    2. David Alexander & Pascale Delvaille & Frédéric Demerens & Anne Le Manh-Béna & Chiara Saccon, 2012. "La consolidation des co-entreprises en IFRS : étude de l'impact du changement de méthodes pour les sociétés européennes," Post-Print hal-00935843, HAL.
    3. Carmen- Alexandra BALTARIU, 2015. "The Current State Of Knowledge In The Value Relevance Research Field," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 13-20, April.
    4. Alin Eliodor Tanase & Traian Ovidiu Calota & Florin Razvan Oncioiu & Ionica Oncioiu, 2019. "Investments in Associates and Joint Ventures," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(1), pages 47-50, March.
    5. Wayne R. Landsman, 2006. "Discussion of Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3‐4), pages 418-421, April.
    6. Badenhorst, Wessel M. & Brümmer, Leon M. & de Wet, Johannes H.vH., 2015. "The value-relevance of disclosed summarised financial information of listed associates," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 1-12.
    7. Wessel M. Badenhorst & Leon M. Brümmer & Johannes H.vH. de Wet, 2016. "Retracted: The Value‐relevance of Equity Accounted Carrying Amounts and Disclosed Fair Values of Listed Associates," Australian Accounting Review, CPA Australia, vol. 26(2), pages 177-189, June.
    8. Gavana, Giovanna & Gottardo, Pietro & Moisello, Anna Maria, 2020. "Did the switch to IFRS 11 for joint ventures affect the value relevance of corporate consolidated financial statements? Evidence from France and Italy," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 38(C).

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