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You are here: Home » Blog » Financial Training » Joint Ventures and the Income Statement

By Joe Knight

Joint Ventures and the Income Statement

Do you need more information on joint ventures and controlling interest? Give us a call to set up live training for your company or take our online training course.

My busy California week is closed. It was Santa Clara with Silicon Valley Bank and then home for less than 24 hours. I was off to Bakersfield for a day and a half with Granite Construction. Three days in one week with two destinations pretty much pegs it with me these days. It was good classes and I enjoyed the time in class but it was long too.

Bakersfield was tough because there was no way to fly there direct from Salt Lake City. So I decided to take the next best alternative as fly in and out of Burbank and drive the 100 miles to Bakersfield. I’m in the airport waiting for my plane and it Friday afternoon so it worked. Since we ended early it was easy to get through the LA area traffic. I guess leaving before noon did the trick. I even had time to slip in a lunch at my favorite Hollywood such place Kuru Kuru. I also had time to visit my partner, Karen Berman-Riddle’s gravesite.

Granite was another good session. They started out really quiet and I thought I was in for a long day and a half but they really warmed up. There were about 35 or so in the group with some sharp people which meant interesting and sharp questions. We spent more time than usual on the income statement, I had a lot of questions surrounding format of the statement as it relates to joint ventures. It turns out that in the construction industry there are significant joint ventures on projects. Since Granite at $2.5 billion annual revenue is a larger player in the industry they often are the lead partner in these ventures due to their bonding ability. On the income statement, joint ventures show up in two places.

Income Statement, Profit & Loss, P&L StatementFor ventures where Granite has a controlling interest, accounting rules required that Granite record all of the revenue and cost for that controlling joint venture in their income statement. Therefore, all of the profit will show up in their operating income. Then the minority partners share of the profit or loss in the joint venture is recorded as an adjustment to net income at the bottom of the income statement in a line typically labeled ‘profit/loss attributive to non-controlling partners’.

For joint ventures where Granite is a minority partner, Granite simply shows the loss or gain on their share in the venture in a single line item in the ‘other income’ area of the statement called something like ‘loss/gain in equity interests’. This treatment is common with several of my clients. It is a common point of confusion in the income statement. After ready this blog hopefully it won’t be a point of confusion for you.

Karen HeadstoneOn a final note. As we go into Memorial Day weekend I want to remember and memorialize my partner at Business Literacy Institute (BLI). It has been nearly 4 years since we lost Karen and I miss her. On this trip, I visited her grave at Mount Sinai in Hollywood Hills. Karen is the heart and soul of what we do at BLI. We all still benefit from her great dedication to this wonderful business. Many thousands have been made better by her training methods and her wonderful best-selling book Financial Intelligence. Karen was also a devoted mother to her daughter Marie and husband Young. As I end this blog I say to Karen what she said to me in her last text before she passed. I miss you, I’ll love you.

Do you need income statement training? Contact us at 818-591-5955 to talk about scheduling a training session.

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