Joint Arrangements

Question 1

Joint Arrangement

Answer 1

exists when 2 or more parties undertake a business activity together and jointly control that activity

Question 2

Joint arrangements can be established for a variety of purposes like:

Answer 2

• share costs and take risks
• gain access to new tech or new markets

Question 3

Joint arrangements can also be classified as:

Answer 3

• Joint ventures
• Joint operations

Question 3

Joint control

Answer 3

The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control

Question 4

Joint operator

Answer 4

A party to joint operation that has joint control of that joint operation

Question 5

Joint venturer

Answer 5

A party to joint venture that has joint control of that joint venture

Question 6

What is the key feature of a joint arrangement

Answer 6

Joint control (unanimous consent)

Question 7

Joint operation

Answer 7

each operator contributes the use of assets or resources to the new activity but retains title and control of these assets and resources. A separate legal entity may or may not exist

Question 8

Joint venture

Answer 8

an agreement where two or more parties pool resources and form a separate legal entity to accomplish a specific project or venture

Question 9

T or F: in joint ventures, the separate legal entity retains title to the assets. The venturers share in the profits of the entity, or the excess of assets over liabilities upon wind up and dissolution

Answer 9

TRUE

Question 10

Commercial substance

Answer 10

occurs when a transaction causes an identifiable and measurable change in the economic circumstances of the entity

Question 11

When does a contract have commercial substance

Answer 11

if the risk, timing, or amount of the reporting entity’s future cash flows will change as a result of the contract