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IFRS 11: Joint Arrangements (Standards (IAS 27 (Separate financial…
IFRS 11: Joint Arrangements
Standards
IAS 27
Separate financial statements
IAS 28
Investments in associates and joint ventures
IFRS 12
Disclosure of interests in other entities
IFRS 11
Joint arrangements
Disclosure
IFRS 12
disclosure of joint arrangements
different disclosure requirements for joint operations vs joint ventures
Definitions
joint control
contractually agreed sharing of control of an arrangement
exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control
par 4-13
control
IFRS 11 requires
respective parties firstly have control over the arrangement collectively
then whether or not they jointly have control
control has same meaning as IFRS 10
ability to change the amount of those returns
by virtue of power over the investee
exposure or rights to variable returns from involvement with the investee AND
joint arrangement
2 or more parties have joint control
advantages
opportunity for an enterprise to tackle larger and more risky projects
ability to operate in foreign markets
possible tax benefits
sharing of new technology
no individual investor is in a position to exercise unilateral control over the joint arrangement
contractual relationship resulting in joint control
IFRS 11 (B9-11)
if rights are protective
How to distinguish between jointly controlled operations and joint ventures
classification of JA depends on the rights and obligations arising
Factors to consider when classifying a JA
IFRS 11 B16-21
NOT structured through a separate vehicle
Joint operation
Structured through a separate vehicle
Consider B22-33
terms of the contractual arrangement
other facts and circumstances
legal form
Joint venture or joint operation
IFRS 11 par 14-19
How to account for a joint venture
separate FS
JV has accounting policy choice EITHER
at fair value (IFRS 9)
using the equity method ito IAS 28
at cost
participants in JV
apply respective IFRS
i.e. those NOT sharing in joint control
could lead to
IAS 28
significant influence
IFRS 9
not the case
IFRS 11 requires (par 24)
JV to be equity accounted
ito IAS 28
in the group FS of the joint venturer
N.B! accounting for JV is the same as associates
typically
i.e. joint venture
for the joint arrangement
joint venturers set up a new entity
JV obtains its initial resources via contributions from venturers
How to account for a joint operation
joint operator shall recognise
its share of any jointly incurred liabilities
its share of the joint operation's income
its share of any jointly held assets
its share of the joint operation's expenses
separate FS
entity's own assets and
share of any jointly controlled assets
entity's own liabilities and
share of any jointly incurred liabilities
entity's own income/expenses and
share in the joint operation's income/expenses
IFRS 11 par 20-23
N.B! analyse the agreement between the parties to the joint operation to understand which assets/liabilities are jointly contracted vs those assets/liabilities that are fully controlled by a particular party