Ecolab's announcement that it is "deconsolidating" its businesses in Venezuela might look like a creative accounting approach to get a bad business off the books.

But Ecolab really had no choice. The maneuver met the test of technically correct accounting as well as the test of common sense, to reflect operating in a country that's coming apart.

Some of the accounting is easy to understand, but some aspects of it had to be new to even savvy investors, including the idea that Ecolab would "deconsolidate" the operations in Venezuela from its financial statements.

That might sound like the company has just cut these operations loose to fend for themselves, but Ecolab still owns them and they are still open this week and trying to take care of customers. The deconsolidation is only about how to account for them.

Starting with the first quarter of this year, they will be accounted for under what's called the cost method. That's an approach far more commonly used when a big company like St. Paul-based Ecolab buys a small minority stake in some other company.

A minority investment wouldn't give a company like Ecolab control, so under the cost method the investment would be accounted for at just what it cost. That number would go on the balance sheet and stay there until the investment is sold. Any profit or loss would hit the income statement then.

That idea of control when figuring out how to properly account for something is an important one. If a big company became the principal beneficiary of another company and took control of it, then it would give investors a far clearer picture if everything related to that subsidiary got added to the parent's financial statements. That means adding assets and liabilities on the balance sheets as well as the profits and losses on the income statement.

What Ecolab is saying, and what big multinationals like Ford Motor, PepsiCo and Procter & Gamble have said, is that in Venezuela these days what happens in their businesses is really beyond their control.

Yes, it's that bad.

Depending on which account you read, the Venezuelan economy is about to completely collapse or already has. Total economic output has shrunk by a lot the last couple of years and will shrink again this year. Meanwhile, the world's worst consumer price inflation is still gathering steam, according to the International Monetary Fund, and the annual rate of inflation could surge past 700 percent this year.

One reason economic estimates vary is that no one can really know without being on the street what the Venezuelan currency, the bolívar, is really worth this week. Not surprisingly, there are now widespread shortages of the basic staples of life.

Part of the explanation for how Venezuela got into this sorry state is that its exports are almost completely dependent upon the oil industry, now in the middle of a painful downturn. That would be bad enough. Yet the Economist magazine has described the minister in charge of economic policy as a left-wing sociologist who attributes the economic problems to "economic war" and rejects as nonsense some pretty well-understood economic principles, such as what might happen to inflation if the government printed money like mad.

As the economic crisis in Venezuela has deepened, U.S. companies found that there was really no longer any effective way to exchange Venezuelan currency into dollars. Operations there couldn't pay bills denominated in dollars or pay dividends to their parent companies.

The other issue is whether a company can freely operate as normal there given government interference, according to Julie Kunkel, partner in Minneapolis for the global accounting firm Ernst & Young. She noted Ford said it couldn't seem to get needed parts for its Venezuelan operations.

"Although there is some level of judgment to determine whether you meet the criteria on control of the subsidiary … it is not an election," she said. "If you meet those criteria, you are required to deconsolidate."

Plummeting values for local currencies and head-scratching regulations are some of the risks of doing business outside of stable home markets, and the list of blue-chip American companies owning up to a big problem in Venezuela is growing long.

Ecolab is deeply experienced itself at doing business far from home, having first gone overseas 60 years ago. International expansion really took off in the early 1990s. That was when the company implemented a simple strategy of circling the customer with more services and also following them anywhere, which it called circling the globe.

Ecolab's presence in Venezuela only grew with its $8 billion acquisition of the company Nalco in 2011, with Nalco's focus on serving the oil and gas industry. This week Nalco still listed nine facilities in Venezuela. The company just disclosed that more than three-quarters of its roughly $200 million in 2015 revenue in Venezuela came from the oil and gas industry.

Based on the way the company is now accounting for Venezuela, those operations are now worthless. Ecolab is acknowledging that whether the business succeeds there or can even remain open is beyond the company's control.

A clear picture of on-the-ground business reality, of course, is the goal of good accounting.

lee.schafer@startribune.com • 612-673-4302