unincorporated legal entity

This Subtopic applies equity method and joint venture accounting to the oil and gas industry. Its core point is that joint interest (joint venture) operations, in which working interest owners retain an undivided interest in a jointly operated property run by a designated operator, are usually reflected by including the investor's proportional share of the revenues, expenses, and assets directly in its financial statements rather than by a one-line equity method presentation.

This Subtopic addresses consolidation issues for construction contractors, principally the availability of proportionate gross presentation for investments in unincorporated entities (such as construction joint ventures) that are accounted for under the equity method. Per 810-910-45-1, referencing 810-10-45-14, proportionate gross presentation is generally prohibited for equity-method investments in unincorporated legal entities, but an exception exists when the investee operates in the construction industry (or an extractive industry). Its scope follows that of Subtopic 910-10 (see 910-10-15).

This Subtopic addresses when a mining entity may use proportionate consolidation — presenting its pro rata share of an investee's assets, liabilities, revenues, and expenses on a gross basis rather than as a one-line equity method investment. Proportionate consolidation is permitted only where it has been established industry practice, and for extractive activities it is limited to unincorporated legal entities whose activities are confined to the extraction of mineral resources. Entities engaged in refining, marketing, or transporting extracted minerals are not "in an extractive industry" for this purpose.

This Subtopic permits proportionate consolidation (a proportionate gross presentation of assets, liabilities, revenues, and expenses) for oil and gas ventures, an exception to the general rule that equity method investments in unincorporated entities are presented on a one-line basis. It applies only where proportionate consolidation is established industry practice, and the oil and gas industry is such an industry.