IFRS 11 - Joint arrangements

Publication date: 13 Nov 2018

Resources (This includes links to the latest standards, drafts, PwC interpretations, tools and practice aids for this topic.)


Latest developments

In December 2017 the IASB issued the Annual Improvements to IFRS Standards 2015 – 2017 Cycle. The amendments include clarifications of the accounting for previously held interests when an entity obtains joint control of a business that is a joint operation.  These amendments are effective to transactions in obtaining joint control on or after to the beginning of annual reporting periods beginning on or after 1 January 2019, with earlier application permitted.

In October 2017 the IASB issued amendments to IFRS 9 and IAS 28. The amendments to IAS 28 clarify the accounting for long-term interests in an associate or joint venture to which the equity method is not applied. An example is published by the IASB to illustrate how companies apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or joint venture. The amendments are effective from 1 January 2019, with earlier application permitted.

Overview

A joint arrangement is a contractual arrangement where at least two parties agree to share control over the activities of the arrangement. Unanimous consent towards decisions about relevant activities between the parties sharing control is a requirement in order to meet the definition of joint control.

Joint arrangements can be joint operations or joint ventures. The classification is principle-based and depends on the parties’ rights and obligations in relation to the arrangement.

When the parties’ exposure to the arrangement only extends to the net assets of the arrangement, the arrangement is a joint venture.

Joint operators have rights to assets and obligations for liabilities. Joint operations are often not structured through separate vehicles.

When a joint arrangement is included in a separate vehicle, it can be either a joint operation or a joint venture. In such cases, further analysis is required on the legal form of the separate vehicle, the terms and conditions included in the contractual agreement and sometimes, other facts and circumstances. This is because in practice, the latter two can override the principles derived from the legal form of the separate vehicle.

Joint operators account for their rights to assets and obligations for liabilities. Joint ventures account for their interest by using the equity method of accounting (see IAS 28 Topic home page).

 
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