How should a participating government's undivided interest in a capital asset of a joint venture be reported?

The correct answer is that a participating government's undivided interest in a capital asset of a joint venture should be reported as an asset in the participating government's statement of position. This is because the participating government has an ownership interest in the capital asset, which reflects a real economic resource that the government controls or has claim over.

In a joint venture, the participating government is responsible for recognizing its portion of the asset, reflecting the legal and financial benefits it derives from its interest. This alignment with accounting principles ensures transparency and accountability in financial reporting, allowing stakeholders to see how much of the capital asset belongs to the participating government.

Reporting the asset solely within the statement of position of the participating government avoids double-counting or misrepresenting the interests held in the joint venture, highlighting the government's claim to the asset while allowing the joint venture itself to accurately reflect its overall financial position in its own statements.