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Critical evaluation of the adequacy of the application of Equity Method for quality reporting of Joint Ventures

  • While sustainability reporting has moved into focus and has been transformed into legislation, it is now increasingly a matter of concrete implementation and integration of sustainability as part of accounting. Via “The 2030 Agenda for Sustainable Development” Sustainable Development Goals (further in text: SDG(s)) were set by the United Nations (further in the text: UN) in 2015. The SDG 17 “Partnerships for the goals” can be seen as orientation and essence of pursuing sustainable ethos. Many sustainable reporting formats hence refer to SDG 17 in order to allow users to assess the preparers’ degree of sustainability. In the corporate world, no other association stands for “partnership” like a joint venture. The International Financial Reporting Standard (further in text: IFRS) 11 states that the at-equity-method in accordance with the International Accounting Standard (further in text: IAS) 28 shall be used for accounting while the proportionate consolidation method was eliminated: The at-equity-method includes joint ventures in the statement of financial positions with their pro rata equity capital and excludes the idea of cumulating the assets and liabilities of the associate c. This method therefore leads to a disintegration of the financial statement of the associate and results in showing the joint venture in just one statement of financial positions item “investments accounted for using the at-equity-method”. The decisive factor for this elimination was criticism from supervisory authorities, auditors and other interested parties. The aim was to reduce or eliminate alternatives, redundancies and conflicts within the standards. While the exclusive use of the at-equity-method was much discussed by - among others - the International Accounting Standards Board (further in text: IASB), preparers and users have found their ways of dealing with the adjusted accounting rule. The following article addresses possible limitations of accounting rules, identifies challenges in an interrelated accounting system and provides suggestions to improve information quality especially related to sustainability aspects by analyzing the current reporting landscape as well as developments at IASB.

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Author:Gunther Meeh-BunseORCiD, Katja Luer
Title (English):Critical evaluation of the adequacy of the application of Equity Method for quality reporting of Joint Ventures
Parent Title (English):Proceedings of FEB Zagreb 15th International Odyssey Conference of Economics and Business
Editor:Sanja Sever Mališ, Ivana Načinović Braje, Petra Halar
Document Type:Conference Proceeding
Year of Completion:2024
Creating Corporation:University of Zagreb, Faculty of Economics & Business
Release Date:2024/07/18
Tag:EU taxonomy; accounting projects; accounting standards; equity method; sustainable development goals
First Page:378
Last Page:387
15th International Odyssey Conference on Economics and Business, May 22-25, 2024, Dubrovnik, Croatia & online

Open Access
Faculties:Fakultät MKT / Institut für Management und Technik
DDC classes:300 Sozialwissenschaften / 330 Wirtschaft
Review Status:Peer Reviewed
Licence (German):License LogoCreative Commons - CC BY-NC-SA - Namensnennung - Nicht kommerziell - Weitergabe unter gleichen Bedingungen 4.0 International