JOINT ARRANGEMENTS

Theories – MCQs & True/False

1. It is an arrangement of which two or more parties have joint control.

a. Joint arrangement
b. Partnership
c. Corporation
d. Construction contracts

2. Contractual arrangement and Joint control are the essential elements in the definition of joint
arrangement. TRUE or FALSE.

3. It is an agreement for the sharing of joint control over an investee distinguishes an interest in a
joint arrangement from other types of investment, such as investment in equity securities measured
at fair value (PFRS 9), investment in associate (PAS 28), and investment in subsidiary (PFRS 3 and
PFRS 10).

a. Joint control
b. Joint venture
c. Contractual agreement
d. Joint operation

4. It is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require the unanimous consent of the parties sharing
control.

a. Joint control
b. Joint venture
c. Contractual agreement
d. Joint operation

For items 5 to 8. What is the interest in voting rights of investee and accounting methos used in the
following type of investment.

5. FVPL or FVOCI asset:

a. Less than 20%

b. 20% to 50%
c. 51% to 100%
d. Contractually agreed

6. Investment in associate:
 a. Less than 20%
b. 20% to 50%
c. 51% to 100%
d. Contractually agreed

7. Investment in Subsidiary:

a. Less than 20%

b. 20% to 50%
c. 51% to 100%
d. Contractually agreed

8. Joint operation:

a. Less than 20%

b. 20% to 50%
c. 51% to 100%
d. Contractually agreed

9. It is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the assets and obligations for the liabilities of the arrangement. Those parties are called
“joint operators”.

a. Joint venture
b. Contractual agreement
c. Joint operation
d. Separate vehicle

10. It is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the arrangement. Those parties are called “joint ventures”.

a. Joint venture
b. Contractual agreement
c. Joint operation
d. Separate vehicle

11. PFRS 11 requires the use of the equity method when recognizing interests in joint ventures. TRUE
or FALSE.

12. Are the following statements about the sale of a non-current asset by a venturer to a joint venture
true or false?

(1) In all circumstances the venturer recognizes the whole of any impairment loss arising

(2) In all circumstances the venturer recognizes the whole of any gain arising
 a. Statement 1: False; Statement 2: False
b. Statement 1: False; Statement 2: True
c. Statement 1: True; Statement 2: False
d. Statement 1: True; Statement 2: True

13. (PFRS) As per PAS 28, in cases where the reporting period of the investor and the investee are
different, then the difference shall not exceed:

a. 1 month
b. 6 months
c. 3 months
d. 9 months

14. (PFRS) A party to a joint venture who has joint control over that joint venture is called:

a. Controller
b. Venturer
c. Capitalist
d. Investor

15. A separately identifiable financial structure, including separate legal entities or entities recognized
by statute, regardless of whether those entities have a legal personality

a. Separate vehicle
b. Separate car
c. Separate entity
d. Separable asset

16. Applying PFRS for SME, which type of joint venture does the following case describe?

The joint venture has been established as a partnership. The entity controls assets, incurs liabilities and
expenses, can enter into its own contracts, can raise finances for the joint venture, maintains its own
accounting records and prepares and presents financial statements. Each venturer is entitled to a share
of the profits or output.

a. Joint operation
b. Jointly controlled entity
c. Jointly controlled asset
d. Joint venture

17. When there are no separate books maintained for a joint operation, the joint operation’s
transactions may be summarized in a management account called “Joint operation.” Unsold
merchandise in a joint operation is placed in which side of the “Joint operation T-account”?
 a. Debit side
b. Credit side
c. A or B
d. Not placed

18. (Adapted) Applying PFRS for SME, this form of joint venture involves the use of assets and other
resources of the venturers rather than the establishment of a separate entity

a. Jointly controlled operations

b. Jointly controlled entities
c. Jointly controlled assets
d. All of the choices

19. Applying PFRS 11, which type of joint arrangement does this case describe?

Three oil production companies jointly control and operate an oil pipeline. Each party uses the pipeline to
transport its own product in return for which it bears a proportion of the expenses. Each party has
control over its share of future economic benefits, but together they do not establish a corporation,
partnership or other entity.

a. Jointly controlled operation

b. Jointly controlled entity
c. Joint venture
d. Joint operation

20. Which of the following is not an example of a joint arrangement?

a. Two oil production companies jointly owning a pipeline

b. Joint control of a property
c. Joint construction of real estate property
d. None of the above

21. How should a joint venturer account for its investment in a joint venture in its separate financial
statement?

a. Line by line consolidation method

b. Full goodwill method
c. One-line consolidation method
d. Proportionate consolidation method

22. Joint ventures can take many forms and structures. Joint ventures may be created as partnership, as
corporations, or as unincorporated associations. All of the following are the distinct types of joint
venture, except

a. Jointly controlled interests.

b. Jointly controlled entities.
 c. Jointly controlled operations.
d. Jointly controlled assets

23. It is a party to a joint venture and does not have joint control over that joint venture.

a. Venturer.
b. Investor in a joint venture.
c. Investor with a power to govern the financial and operating policies.
d. None of these.

24. A joint operator accounts for its interest in a joint arrangement using the equity method. TRUE OR
FALSE.

False. Equity method is applied to joint venturer’s interest

25. An entity that acquires interest in a joint operation whose activity constitutes a business, shall
account for its share.

a. Using the equity method

b. As a business combination
c. At fair value
d. At cost