IFRS 11 Summary Notes

IFRS 11 Joint Arrangements

INTRODUCTION

The core principle of IFRS 11 is that a party to a joint arrangement determines the type of
Core joint arrangement in which it is involved by assessing its rights and obligations and
Principle accounts for those rights and obligations in accordance with that type of joint
arrangement.

DEFINED TERMS
Joint An arrangement of which two or more parties have joint control. Joint
arrangement arrangements are classified as either joint operations or joint ventures.
The contractually agreed sharing of control of an arrangement, which exists only
Joint control when decisions about the relevant activities require the unanimous consent of the
parties sharing control.
A joint arrangement whereby the parties that have joint control of the arrangement
Joint
have rights to the assets, and obligations for the liabilities, relating to the
operation
arrangement.
A joint arrangement whereby the parties that have joint control of the arrangement
Joint venture
have rights to the net assets of the arrangement.
Joint A party to the joint operation that has joint control of that joint operation.
operator
Joint A party to a joint venture that has joint control of that joint venture.
venturer
Party to a An entity that participates in a joint arrangement, regardless of whether that entity
joint has joint control of the arrangement.
arrangement
A separately identifiable financial structure, including separate legal entities or
Separate
entities recognised by statute, regardless of whether those entities have a legal
vehicle
personality

JOINT OPERATIONS
Joint operation is a joint arrangement whereby the parties that have joint
Definition control of the arrangement have rights to the assets, and obligations for the
liabilities, relating to the arrangement.
A and B decide to enter into a joint venture agreement to produce a new product.
A undertakes one manufacturing process and B undertakes the other. A and B
Example
each bear their own expense and take an agreed share of the sales revenue
from the product.
A venturer shall recognize in its financial statements:
Separate FS of (a) the assets that it controls and the liabilities that it incurs; and
Venturer (b) the expenses that it incurs and its share of the revenue that it earns
from the sale of goods or services by the joint venture.
Consolidated
No further adjustment or consolidation procedure is required.
FS of Venturer

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IFRS 11 Summary Notes

JOINT VENTURES

Joint venture is a joint arrangement whereby the parties that have joint control
Definition
of the arrangement have rights to the net assets of the arrangement.
E and F enter into a joint venture agreement to manufacture and sell a new
product. They set up entity that carries out these activities. E and F each own
Example 50% of the equity share capital of the entity and are its only directors. They
share equally the major policy decisions and are each entitled to 50% of the
profits of the entity.
FS of Joint
A jointly controlled entity usually keeps its own accounting records.
Venture
Separate FS of In the separate financial statements of the venturers, the investment in the joint
Venturer venture is recorded at cost or under IFRS 9.
Consolidated
Equity method is used (as discussed above).
FS of Venturer

Dated: 22 November 2016

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