Joint Arrangements

Question 1

THIS IS A NEW TOPIC. LEARN.

Answer 1

THIS IS A NEW TOPIC. LEARN.

Question 2

What is the accounting standard for joint arrangements?

Answer 2

IFRS 11

Question 3

What is the definition of a joint arrangement?

Answer 3

An arrangement over which two or more parties have joint control I.e. where there is unanimous consent of those parties sharing control is required to make decisions about relevant activities

Question 4

What are the two types of joint arrangements?

Answer 4

• joint ventures

- joint operations

Question 5

Briefly explain what a joint operation is

Answer 5

Jointly controlling parties have rights to the assets and obligations for the liabilities relating to the arrangement. Generally speaking there is no separate entity.

Question 6

Briefly explain what a joint venture is

Answer 6

A joint arrangement whereby the jointly controlling parties have rights to the net assets of the arrangement. In this instance, a separate entity is established

Question 7

How can joint ventures be accounted for?

Answer 7

Equity accounting

Question 8

How do you account for a joint operation?

Answer 8

No consolidation.
Account for own share of assets, liabilities, income and expenses.

For income and expenses, include correct % in P/L. Any amounts over or under, JO payable or receivable.

Question 9

Explain how equity accounting is shown in the financial statements?

Answer 9

SOFP
NCA
Inv in JV

SPLOCI
Profit from JV/ Ass (% of PFY above PBT)

OCI from JV/Ass

Question 10

How do you get to Investment in joint associate?

Answer 10

Cost + Post Acq’n retained reserves% (less Impairment if applicable)