Joint venture

A joint venture (JV) is a business that is jointly controlled by two (usually) or more parties by explicit agreement.

Companies that have stakes in joint ventures will usually consolidate them by showing a proportionate share of the profits and assets of the joint ventures in the consolidated accounts.

IFRSs also allow joint ventures to be consolidated in the same way as associates.

The joint ventures of listed companies will almost always be incorporated themselves.

The classification of a business as a joint venture requires that there be an explicit agreement to share control. This means that joint ventures will almost always be clearly labelled as such from the start.

If one company has outright control of a business, then it is a subsidiary, not a JV.

If no one company has outright control, several parties have significant stakes and there is no agreement over control then it is likely to be an associate.

Copyright Graeme Pietersz © 2005-2020