Unsophisticated Explanation of Financial Reporting of Interests in Joint Ventures ( AS 27)

Accounting standard 27 explains the joint venture and its accounting treatment. ICAI has defines joint venture, venturer and joint control and control in this standard. Joint venture means the contract between two or more parties for doing economic activity. Control on the business activities by both is called joint control.

For making financial statement of joint venture , joint venture can be divide into two different aspects :-


Ist When Joint Venture treated as joint operation:-

In this aspect, there is not existence of any new corporate. Venturer join in the venture just for completing any project and uses their own assets, so there is no need to make separate financial statements. But in the books of venture, treated as investment and profit from joint venture will show as return on the joint venture investment.

2nd When joint venture treated as separated entity:-

If the partners of joint venture create a corporate and do written agreement for doing specific project for earning profit. Then all financial books must be maintained due to separate entity of joint venture and financial statements are made just like other business organization’s financial statements.