Assume Gibson Company is an equal partner in a joint venture with Glover Company. Each company owns 50% of Pesci Company and equally shares decision-making authority. Required:Describe how U.S. GAAP and IFRS differ in how they would have Gibson account for this investment.
What will be an ideal response?
Both IFRS and U.S. GAAP generally require that the equity method be used to account for joint ventures. Gibson could elect the fair value option under U.S. GAAP, but not under IFRS. Also, IFRS requires that accounting policies of investees be adjusted to correspond to those of the investor when applying the equity method. U.S. GAAP has no such requirement.
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