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Basic Question 5 of 6
The proportionate consolidation method:
B. Results in lower net income than the equity method.
C. Results in the same net income as the equity method.
A. Results in higher reported net income than the equity method.
B. Results in lower net income than the equity method.
C. Results in the same net income as the equity method.
User Contributed Comments 5
| User | Comment |
|---|---|
| americade | I presume consolidated and equity results in same equity, too? |
| ilzina | Why? Net income is the same for equity and consolidated type. I would think that income is lower under proportionate consolidation (only proportions of sales, expenses are included vs. full amounts in standard consolidation). |
| bmeisner | Net income is the same for each method, the only difference between equity and proportionate consolidation is that the balance sheet items for the investee are also included on the investor's balance sheet for proportionate. |
| jmcarr02 | Proportionate consolidation occurs in joint ventures, so there is no minority interest. |
| davidt876 | the notes and my cursory google research say that both IFRS and US GAAP require the equity method for joint ventures |
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Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.