Proportional Consolidation

Definition of proportionate consolidation

Proportional consolidation is a form of consolidation in the context of accounting in the group. It is permitted in the consolidation of joint ventures, which exist when two or more independent companies cooperate economically.

Joint venture or jointly

A legally independent company is founded or acquired in order to carry out tasks in the common interest of the company. They are also founded under the names of partner companies, joint ventures or jointly owned companies. A joint venture is characterized by the following two characteristics:

  • Joint management by the corporate companies
  • Independence of corporate companies from one another

Joint ventures are allowed according to § 310 Abs. 1 HGB

According to Section 310 (1) of the German Commercial Code (HGB), a joint venture may be included in the consolidated financial statements in accordance with the shares in the capital and the quotas that belong to the company. This is not a consolidation option, according to which the company could deviate from a required full consolidation. Proportional consolidation only replaces the otherwise required consolidation after Equity method. If the joint venture is also a subsidiary i. According to Section 290 of the German Commercial Code (HGB), it must be included in the consolidated financial statements as part of full consolidation.

With proportionate consolidation, the items in the individual balance sheets of the joint ventures are only taken into account proportionally during consolidation. It takes place in accordance with the shares in the capital. It does not depend on the proportion of voting rights.

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