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Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?
Author(s) -
Soonawalla Kazbi
Publication year - 2006
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2006.00609.x
Subject(s) - valuation (finance) , financial statement , accounting , earnings , joint venture , financial statement analysis , revenue , business , joint (building) , accounting information system , economics , actuarial science , finance , financial ratio , commerce , architectural engineering , audit , engineering
Unlike US GAAP, accounting principles in Canada and the UK require disclosure of disaggregated components of joint ventures and associates. Using comparative analysis of Canadian, UK and US data, this study investigates the potential loss of forecasting and valuation relevant information from aggregating joint venture and associate accounting amounts. Findings show that aggregating joint venture and associate investment numbers, and aggregating joint venture revenues and expenses, each leads to loss of forecasting and valuation relevant information. Thus, current US accounting principles likely mask information that financial statement users could use to predict future earnings and explain share prices.