Where an Asset Contributed to a Joint Venture Is Not

question 26

Multiple Choice

Where an asset contributed to a joint venture is not recorded in the venturer's books at fair value a common accounting treatment is which of the following?

• A) Revalue the asset and take any difference to an asset revaluation reserve. The other venturers' shares of the asset are then credited against the advance to joint venture account.
• B) Treat the difference on the other venturers' shares as a profit or loss on sale.
• C) Any profit or loss on the inter-company transaction is regarded as unrealised and eliminated in the accounts.
• D) The asset is treated as sold to the joint venture and the profit or loss on the whole amount recognised in the period that it is contributed to the joint venture. Each venturer will record its share of the asset in its own accounts at fair value.
• E) None of the given answers.

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Definitions:

Primacy Effect

The psychological phenomenon whereby the first items presented in a list are remembered more easily than those in the middle.

Recency Effect

A memory bias that occurs when the most recently presented items or experiences are more likely to be remembered than those presented earlier.

Individual's Psychology

A psychological perspective focusing on the unique experiences and motivations of an individual, often associated with Alfred Adler.