However, a jointly controlled entity differs from an arrangement in

which multiple entities jointly own and control assets contributed to, or

acquired for the purpose of, the joint venture. With jointly controlled assets,

a separate entity does not exist. Rather, two or more venturers jointly control

a group of assets that are used for their benefit. In most of these arrangements,

each venturer often takes a proportionate share of the output from

the assets, and each bears an agreed share of the expenses incurred (as distinguished

from each having a share of the net profit or loss, which is how

most joint ventures are structured).

These types of joint ventures do not involve the establishment of a

separate corporation, partnership, or other entity, or a financial structure

that is separate from the venturers themselves. Each venturer has control

over its share of future economic benefits through its share of the jointly

controlled assets.

In the case of interests in jointly controlled assets, IFRS requires that

each venturer recognize five items in its financial statements:

1. Its share of the jointly controlled assets, classified according to the nature

of the assets

2. Any liabilities that it has incurred

3. Its share of any liabilities incurred jointly with the other venturers in

relation to the joint venture

4. Any income from the sale or use of its share of the output of the joint

venture, together with its share of any expenses incurred by the joint

venture

5. Any expenses that it has incurred in respect of its interest in the joint
venture

The fraud risk here is, once again, obvious. If the individual assets that

are jointly controlled are overstated through the misapplication of fair value

accounting, then the proportionate share of those assets on the financial

statements of each venture will, in turn, also be overstated. The same is true

with the understatement of liabilities.