Set 8 FR 28 Joint Arrangements Flashcards
define joint arrangement
a contractual arrangement that binds one (or more) parties together
define joint control
decisions must require unanimous consent of parties sharing control. contractually agreed sharing of control of arrangement.
two types of joint arrangements?
joint operation and joint venture
differences between them
joint operation - parties have rights to assets and obligations for liabilities.
joint venture - parties have rights to only the net assets of the arrangement.
what 4 factors are used when determining classification as joint operation or venture?
is entity structured through a seperate vehicle?
contractual terms
legal terms
other factors
accoutning for joint operation
no investment account
assets/liabilities/revenue/expenses shown on joint operator FS, including shares of anything held jointly (as in consolidatied accounts)
accounting for joint venture
equity method
how are entries for assets given up accounted for?
DR investment (total FV)
CR asset (book value)
CR gain on sale (percentage of investment NOT OWNED - as this is outside the company)
CR unrealized gain on sale (percentage of investment OWNED - as this is within company)
how are entries for assets given up accounted for subsequently
DR unrealized gain on sale (in line with depreciation)
CR realized gain on sale
Entries for income and dividends
Income = dr investment (for proportional amount) cr equity income Dividends = dr cash cr investment
how are i/co sales accounted for?
after tax unrealized gain (in proportion of investment) removed from equity income until sold
ASPE differences
can use cost or equity method
