IFRS 11- Joint arrangements Flashcards
IFRS 11 defines joint control and requires an entity that is party to a joint arrangement to determine the type of
joint arrangement in which it is involved by assessing its rights and obligations
What are the key points?
The key thing is that no one party (venturer) should be in a position to control the activities.
It is important that there is a contractual arrangement to establish this joint control. This could be by contract or via discussions (minuted) between the venturers, or they may be set out in the articles of the entity, but it should usually be in writing.
What is joint venture definition?
.joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
how is joint venture treated i.e. accounting method
Using Equity Method in accordance with ISA 28 Investments in Associates
A joint venturer shall recognise its interest in a joint venture as an investment and shall account for that
investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures unless the entity is exempted from applying the equity method as specified in that standard.
what is an example of joint venture
e.g. a new entity/ LTD / Partnership where each person has 50% ownership for example
what is joint operation definition
A Joint operation is a joint arrangement whereby the parties that have joint control of the arrangementhave rights to the assets and obligations for the liabilities, relating to the arrangement.
jointly controlled operation occurs when each venturer uses its own assets and incurs its own expenses in contributing to a joint product.
give an example of joint operation
A jointly controlled operation occurs when each venturer uses its own assets and incurs its own expenses in contributing to a joint product. For example, a number of venturers each might supply a part of a completed aircraft (engines, wings, etc) in return for a proportion of the proceeds from selling an aeroplane.
Each venturer accounts for its own costs, assets and liabilities and takes a proportion of the sale proceeds, all lineby-line in the financial statements.
how is joint operation accounted for?
Line by line
A. Its assets, including its share of any assets held jointly.
B. Its liabilities, including its share of any liabilities incurred jointly.
C. Its revenue from the sale of its share of the output arising from the joint operation.
D. Its share of the revenue from the sale of the output by the joint operation; and
E. Its expenses, including its share of any expenses incurred jointly.
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