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    Joint

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    sunthatburns00

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    © All Rights Reserved
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    of 40
    Joint Operations ang ing Arrangements « investments ir Ociates Ventures / ; — Chapter 9 . Joint ] figure 9-1: Conetatin of | ] operon nanese2 11 122 A 28 pee hep ay ‘Corsten inoccoarce wih 5 10 | Ticonrmhacracoee | r wah 2 | | ie roger noes Spit wns Hencet a =— == ‘cot rsa Umer oocoaarse aed oven nd ners WNP ech ee Serhan Samat force steno : 3 z FERS 11 Joint Arangements ccopts ne dion of conto Included in PRS 10.0.0 | ‘bass for determining whether hee ison! cont : Objective of Joint Arangements ‘edobth pines for orca epoting by enties nee ok ‘omens ict co conkoled Joly (ey oh ‘rangements). oe noone me nT EE omelet eit ee rt seen aT ‘Advonced Financial Aecouating “A Wi CHAP Te gy Tomeet the objective, PFRS 11 define joint contot 1. requires an entity ora party to a jolnt rangement fo determine the ype of jing ‘rangement in wrich tis invowved by assessing sighs and obligations ang 2. 10 account forthe same in accordance wih that ype of joint erangement, DOU the elant ue Ieevort ccs requee ta cont fe. no pat con make The exiteria of joint control need an added clarification: ne party that hos control. The joint + That the SHARING of CONTROL bated on decionscbou fhe releval ates, ; : hele he aongemen! ce tha! the agreement moy rt "enol may be Impl inthe oranges TPH Cone but he exlence ot ‘ond D each hod 25% stake in another enti, XYZ. Ary decors reating to XY. 1o be approved by 75% of he voting membes. z and ¥ fo oct jy even oe ? oily even I tne conroctua, [NO jot cont! it there are tvo or more combinations. one combination, ach ofthe four parties wil recogrive the share of X17 ‘eoch hos significant infuence over X12. Therefore. Tete iocecl | Takia tod _| Tkvoleo sec relevent octiies | ovontcctiies | relevant aces ae ion s ‘sees ond fais, which may or may not form alegalenity such aa company. Even though con a 8 BS Nore Notapplccble | Widely spened block ony decton.X | Noconkl (jot No con int ‘Joint arrangements are defined “as arrangements where fwo or more parties have jolnt ‘control’ Ths wil only apply the relevant activities requie unanimous consent of those who collectively contol the onangement. The key distinction ‘between the two forms:is based upon’ the: partis’ sights ord obligations under the joint rangement. 5 % * Jeet eonrl i onc ¥colecvey onl te re aie 202 thet voles fogeter mee! he eet me Parties that collectively c contract gemer : eee pores cod cole cal the ‘arranger aries No Joa cont - ne c2n0MG Oe oceo mee fe recueneh 2 The fal arangement gives two or more porties joint contol of the Jot cr PY a ol ger ee aes ki oe fa naam wich pares Ms! OFS. ay peal he ewononmen ro a so ‘arrangement os a jolnt eangement & ‘pedi sng ‘that of joint control. end ty ‘accordance wit PAS I fy ¥ ageing. n the cbsence rel Wrangemen! [which case, both Enly X ond Ent “arangement os an exoclal in GCcordaNce with PAS 28 Tis vole to rect reevant actos FEvote to soc rebvon! ochites Thre are iwo sleps in the assessment ofthe existence of joint contol: 1. Assess whether the partes fo the anangement have contr. Control exis in Joint arrangement when two or more investors in the arrangement are exposed. ‘or Have rights, fo variable retuns from thei involvernent with the aangement ‘and have the abilty fo affect those-retums through their power over the ‘rangement. Contro! must be over the “relevait” activites, These are also defined In PFRS 10 ‘ond refer to those activities of the arrangement that significantly affect the rebum of the arrangement. sfetollowing lasram hows hove ase tose 1 Domne» ent oat 1 Joint Arangement (Assessing Joint ist Joint ogreement/anangemen? eae wanes ‘cone cl cebecaye sl ‘De the decor cout he ebro oc requ unelnou case! ote patles 0:0 guppies ecole tty fr conte aergenent [the emangementiscinty contote: The arengementsajln agement. {ointArangerent) \When ah rangement ouside he cope of PS 1. an ey accounts orilsinerest radonce wi levar PERS, sch cs PFRS 10, PAS 28 FERS ‘TYPES cind CLASSIFICATION of «JOINT ARRANGEMENTS ! Aint arangemerit can be cosiied ether + ain operon or + aint ventire The key disnction or elastin Beer hi ct cn ven Ea et i nme i concer: Inmking tis oxenmen e093? © Structure of the’ ate rit me eaves» ‘An en shall determine the type of jt arangemera which it sinvolved, The classileation ofa joint anangement os ot operation cx «ln venture depengy ‘upon the rights and obligation of the pares othe rangement. 1A JOINT OPERATION isa Joint arangement whereby the pales thot have jong Coniol ofthe eangement have rights fo the ASSETS ‘and obligations for tne LUABILITES. relating fo the acngement.. Normal, there wil not be a seperate lly escblshec fo conduct jit operations. Those paties oo cole JOINT OPERATORS. Each operator conhibuls the use of ‘tse or resources tothe actvly. ‘ Following are the examples: ‘Aand 8 decide o enter into joint operation fo produce a new produc. A underokee (one manufoctuing process and 8 undertakes The other A and'8 have ogreed ‘hes eciions regarding the jet operation il bé made unanimously and that each wa ‘bear ther own expenses and fake an agreed share of the sales fevenve from the Lorodvet Rt SE eer Irie ‘Aint operator manufactures pat ofa produc, «second in epevatot completes ne ‘manufaciuing process, and o thie jint operator handles the marketing ofthe Product Revenue and expenses are shared in accordance wih the jit crangement ‘ogeement, 3 —_ = == ‘of a coporation, cis ae ‘An exomple of this type of rangement sono pipine. The operators may contoute assets foo separate Jegat ently fr ther constuction of fe. who share the cosls n accordance with cn aoisement ‘Some jt operations imave the estabshmen! of a corporation, parneship: roar ently or fancil sructre nas sepa fom ihe ont operator ees, nity fr the construction of a ‘owned and used by the nce with on agreement ently. or financial sructure thai sepcrte om he ent operators themselves.” {he pipelne. Once the pipeline & competed, Is jolly owned Ore used by ‘he ‘When two ot more joint operator combine ther operations, resources and experi ‘rd fo produce, market and dstibut jointly @ partici product, such os dh art land gas Joint operations jlnly own contol ean of Pipeline. Each jot operator uses the pein transport Is ow procs elm ft _vhich it bea on agreed proportion ofthe expenses of perating the ppctng. ‘Aavanced Finance Accounting ~ A Comprehensive Conceptcal & Procedal kaassoh ana, "Eby the pares that have rl he NE ASS o he arangene "eam of a seperte ently to conduct the Note that nthe case of ro-paty jo ‘yenturers must have equal equly date fr * est (One jit verte may hold ike wri the ort veer may nok 040% stoke: the jon venture elblhed aslong os the cenractud omongement provides for both jolt ventures to have ot conel mid ott toe cae So a i atm re okies ley el be rade wiht A nd B >, D should be treated as joint 1 jmethod._~ cn he costicaon ofthe et recon oe eae “The accounting teat “rangement eth xing rom Tris classifation i delemined by assesing the nights ond obligations ofthe perigg ment. winen the joint rangement is wef ene mc re 9-3, the flow chat hates several itera thot noes zi ode. cone be met for he joint ‘one ofthe cileia indicates tht the pares have the rights fo the assets ond ons for the liaities, the jel anengement would be clasiied os o JOINT Join crrongemen isnt stutued though a separate vehicle, would be erent is. joint venture or ont operat. conn ems in cortoch organs pres bt ee one, fe ourperehecoeciclona zea te ‘ighs fo the ASSET and obsigations for he UABIUTES of he arangement 4 Join Operation ¥ ‘Accounts or ASSETS, UABILTES ‘Account for aninvesimentin the ‘rangementin accordance wih ‘he equity method (PAS 28) ‘Many common arrar ‘orporations, trusts cre lic yf ry I -onsidered separate vehicles, although Philippine ce ely to be c Jaws should be considered. it should be noted that the ferm “soporte. vehicle” ‘broader than an.“entiy’. ————— eee “Aavanced Financial hecountng ~A Comprehersos Coneotaal &Brarchont aoe 768 CHAPTER g Ba in et EWA epg repo ss Dalgoania; —T ra pare ot oroasne | Tl aronere! © Re n he cobs ond sbipatons of he ‘ | argon * Te_conacee Spore] cline! the bees he et ororgene! tte oho xengenet en fhe exe! aise Seinen rangononter_ | + bigtons fo cane ony ‘roa ofoctenal cope Searangeneno ta Taree Tha cancel —arangonen [ho corkockc~orongens epee ptt o| esther the aoc "of etches each pays Se ‘bs mrenves and expenses on fe he poor ‘ong Wo he Cosine rate pororares | att che arangemen. ecch pat he et rangement. for evome, he antocta orengeren righ fscbh hat revere ord Spores looted on he boss «ine capoiy thet sn pay ‘sone prt opscie iy ® {jot venue Is wheter ho pares have obigars fr fe hb: ‘elng i the arangemers fl some ol which me parte igh or might ot have provided guranies, Guero 8 = : ‘uaxanec oid pares ot for exaree, ecave G sari fem ot rode’ fhancng fo the Joni arangemenl The prvson ol wich +” PFRS 11.50 opplcable fo an eit wich , a a eee irons @JOWT Veg fos ied inves fn een net xeon hat pats ses excoed the inesmen, egg 2 ht let nent et oe oy recognize ONeGaIVE rwesinen, 8 8 ot ecognaed fas the Paty does not irteod, Ch Ks a fcoge corsivetve obf9ofon mate pom Stet ha he pry has olga or ‘accounting for Joint Operations ofthe on vente the jlnt operation meets the " tress Combination oye Cato! "bss torte pincips of FR 3- peauted! ‘SPplled when con interest in a joint operation is 4" Acquiton cost expensed oof losesincured * Te Genlcble ase onda: o he in operons cre measured al for +The exces ofthe conseaton rasered over the fair valet the net als =) ecquited srecognaed as goad, ‘A the reporting dle the inva franca stlement of eoch jit operator vl recone: ¢ Its share of assets held jointly “] tre joint operator's share of the Income, expensed, assets and Habits [PAS 16 wile “othe relevant standard applicable} of the joint operation ore Included in its individuai in ala operation but °° bes NOT have JOINT CONTROL, as ong os that ely has ight othe assets or ‘obligations forthe faites of he joint operation. “The accounting for transaction such othe sale, contbtton or purchase of oselt JOINT OPERATIONS Relationship f + Aoint operation exists when the enfly only has share inthe Individual aisets or |abilties ofthe jolnt anangement (e.g: an oi company sharing the conto of @ pipetine} Key Point ‘+ I's the rights fo individual ASSET (or obligations for LABILTES) that crve a joint ‘operations relationship rather than ight fo the net asset poston (which on the ‘other hand, is «Joint Venture) ofthe jont onangement, In @ JOINT OPERATION, the party recognizes these assets and obligations without ‘imitation, even i that resus nthe abies exceeding the assets, ————E—T_EEE ‘A anced Finance Acuntng =A Coprobantva Conesploal &Procedel betw So early ard ae operaon wich Is lepers spaced os folows: “Sales or Contributions ot Assets Jot Operation 2 : operation ct profi or loss then the joint + lint omc ge pore eae he Pte ra a operon SS ear il a 2 rue ot ae fom ston cope wich 60D. + Ha joint operator ere 796 CHAPTER 9 * must not recognize is shore of ary gins or ses unt ese the assets io on extemal party. A party that paticipats in, but does hot have joint cont of, « jolt operation shop ‘ako account for Bs inferest in the arrangement in accordance with the above ‘mentioned ives. if hat porty has rights to the assets, and obligations forthe Nabies Felating o he joint operation, Noraly, there wl not be a separate enfy established to conduc joint operations Whete the joint operation is undertaken outide a formal shuclue,’ such os @ Corporation or parnenship (eer fo lustation 9-9, separate accounting records do not ‘need fo be kept or he jolt operation. However, for accotnlabiltyrecsors itis expected that he joint operation agreement Would equire these records. PFRS 11 doesnot provide standards on accounting for he joint operation Bet If the joint operation does not sell the output produced, but rather distributes i fo the. + 9perators there ls no prof or loss account rated by he operation. The folowing demonstrates the accounting system within the jint operation, + Te journal enties represent the estabishment of the jint aperaiion and ts ‘ctv throughout the yea i woughout ihe yeor, ‘such gs payment of the costs of producing the oulput are! ‘nd the inventory, at cost, dstbuted fo the. 0 iventony.'n some cases, the costs: may be ‘accounts as expenses and matched in jhe records k rotors withthe revenue from sole of te output. ‘Accounting for Joint Operatién : ‘Books of JOINT OPERATION Enily {Mushation 9-1: Accounting by an Unincorporated Jolt Operation ‘On January 1, 20x4, Drei Company and Cerise Company signed cn agreement to form olnt operation to manutacture «product called Horcoard. {uct is used in the packaging industry and has the advantages of the strength tection qualities of plywood os well asthe flexibly ‘ond durabity of plastic. 0. ce the operation, both operat contbuted P150.000in cash, ne teri ore used during the period, Ho the operatos. is of Dre! and Cerise Company for ne The journal enties inthe joint operation yeor ended December 31, 2014 ore a5 flows: “TebeancedFlrandel counting =A Comprohenihe Conceptual & Procedardidpproas anced | Transfer of materi, labor ond overhead ta Tom pore-neceoyaseaipe. Ta000 Worn Process = ‘ CHAPTER g MB BAP TD g The mojor ledger accounts of interests in relation tothe ont operations re as folows; is. A i ee ‘peralor wil andi and account for movements in : pect conte atone ‘The key feature of a joint operation is: F The Jolnt operator has an interest inthe inclvidual assets and labities ofthe Jot “alee ont eperaion In the gitvotion where the joint operation produces an output distibuted to the {aint operates, the jlnt operator wil receive @ share ofthe ouput ofthe [oat F tress {peraton in he some way he be responsible fora share ofthe enpenses of 2 = Pitot ofthe ther pares ‘operation that ere not copiazed into the cost of he output Sanco APOC eF ee aS er ‘irced Fanaa Acood# menses y ‘Assume: erator YY, contributes cosh of PPO0.000, (1) Joint operator XX-carties « non-curent asset at far valve in its occ, ‘example, on item of plant for 900000 and ths aset is contibuted! 1p Ta pero VY ecours or isa [ph opeaton flows sono | casi OU fg in he recerds of both operates the non-curent asset inthe joint op ‘recorded atthe some amount, P450.000. ection; -Ounting records of an opefalor thal contibutes a non-cunent aset's more comofcated when the operate cai tne contiovted esa ins ocsr ‘amount les than fair valve, In contbuting an asset fo the joint operation: * the operator is effectively seling a proportion of that “asst to the other jit ‘operators, and retaining a proportion for sel. ‘+ Where the canying amount ofthe asetislower® than the fat value, she operator ‘makes a profton seling the proportion of the asset fo the other operators. ‘+, The profits the difference between the far value.and canying amount of he” | ‘proportion ofthe asset sold, {@) JoaT Opel VV accounh fori ned erator XX contributed a nor-curent asset with « far value of 900000, ‘canyi (of P720,000. Joint operator XX con then recognize © ‘Non-curent ass, namely P90,000 (being ¥ (PICO 000 = {oi operatn as olows: (Conn erect... | OI Noncuent asain 0 5 Noreen asetn 0 8% POI saa | Pre cs | O00 Nona aoe ic). LT] a eanansae of NCA PIs 1S sso sen Pte ot the senna ld tothe oh S28 gan _ s eres PO eh Bt CERO that Jolt Opera" 2X hs re ' oe ca anti a ene le town tn peaton xo: ‘Seared he rencane! al niece otha OPeFaKerX ands operator for have the equal shore ofthe non- 51 he lat cpecon copied in he caer coed for hee fact that the ‘operas have the noncurent ase recorded ot diferent Fa ret (2c ales the colcutan of th cost ofthe Inventory ibuted to the operat cin perofon. ‘and C Inc. don on agement fo rode ci cononers forse fo EE ERS 2 ona. to wholesalers. repo eo nts , financing decisions, The ound 28 AAO ined win preica te tye cued inventor. fo inventory on consignment. ‘will account for cnc onde iso condenses WO ucing soto no issn m™m CHAPTER 9 ge ee * No revenue recognized unt he inventory evenly $13 by C: At thoy ‘A woudrecognae 25 share he soereverve Ie hee fps Cconati {nis Musrton 1. Each ofthe three companies used thet own assets fo full thei Contoutin jg {he joint rangement. They shared in the revenves(dshibuted 25% fo A, 456 8, and 30% fC) only tom ne soe of he cr condones. 2. \When the operators jiny own cercin axel the accounting becomes « i ‘mare complicated, n ction to accountng fo thet own asses ond labs Led in th joint operation, they would have fo account fr thet share of the Costs and expenses involved with the jolnty owned axsets, This so form of proportionate (25%: 45%: and 20% sharing) consolidation but on a very lnted basi station 9-3: Accounting for Joint Operation (roportionale Share of Jolnt Operakée) ‘Yvette Tingin-Atienza & Godessa Alvior has a 30% ownership share in joint operation Pamela Esquilo & Semadette Piares. The assets, abilities, revenues and costs ofthe joint operation are apportioned on the basis of shoreh« ismonied at the end of is esfimated useful ie 12 eiscount rate of 8, wos P00,00. + Di oF ended November 30, 2085, the joint operation entered into the folowing fransactions: oe Gal = goods with « production cost of P3,400,000 wete sod fr 5,000,000. ‘manutacturng faciity, amounting to P900,00. ‘he revenue and costs are receivable and payable by ihe two other ont operation peerners who vil setle cmounts outsancing with Tighe Atenza & Abior ater each reporing date. ‘The share of Tingin-Atienza & Alviar in net income from thé joint operations {fo be included in the retcined earings) amounted to 2238000 lusng the proportonale shots of So dolore the shored nal income) s computed ex elow value of ths dsmanting costo the joint arangement ct December. ~ © ted obo tolement of prot go 88 Cased under the PU be casted unde the operopite Hr los frome stlement) forthe yoor seep ‘Accounting by.on Urincerported Jeint Operation - Joint Operator's tepoting Propotionale Share of the Assets, Uoblties Revenues, and Jlnt Operation E Co, ond F inc. igh on ogreement to colectiely purchase on gas pipeline ‘@.company to manage ond operate te spstne on their behal 9s involved in running the pipeline and he revenue earned rom the pipeline re d by the tree pastes based on het ownestip percentage. ‘operating ond fnancing decsons rated tothe pipeine must be agreed to three companies. The cost of purchasing the pipelne wos 50000000, The pipeine hos an estimated 20:yecr usefull wih 0 resicalvalve. Dinvested P15 000,000 for 0308 intrest. The management fe for operaing te ipin fra wos 10.00.00. “Revenue eomed rom the pipeline in 20x wos P1400 he erat nies. in 24 to capt ts SHARE ofthe aces rete fo | nian oma orice 2p ce mm : CHAPTER 9 mo EATER 9 ‘Thus. the share of ne, net income from the joint operations ariourted 10 P1209 995 [showing the properionate share of SOR to deterrine the net Income of the jing ‘operator D) is computed as flows: Italon #5: Acconng by on tnncaperted Jl Oprton- A Ope Point of View: Reporting Proportionate Share of the Assets, Lables. Revenues, ong Expenses ofthe Joln Operation Instead. of contibuting cash for 2 308 inlerest in the gas pipeine, D contibued steel + pipes to be used by the company corsttucting the pipeline. ‘+ D had manufactured the pipes at a cost of P11,000.000: All pates 10 the eas poe tel hoe he EK och ‘+ The other operators have 070% interest inthe joint Gperation. ++ Allother facts are the some os in ustation 9-4 ; ‘Books of JOINT OPERATOR The journal ents fr D In. n 2034, o canto BsSHARE of the active related othe project pipeline: The folowing shotid be observed inrelation fo the above jounalenty: =~ ‘+ Dshouid recognize a gain of P2,800,00 [70% x {P15,000,000 ~P11,000,000)] * A poron ote go con be econo on fhe conn of ctl 2 ft 1, When an ently enters into a transaction with ajint operation in wich iis 0 {aint operator, such as a sole or contibutn of aes it conducing the 2 it cent ote wif Ga Eo atom value of the assets fo be sold or contibuted transfered. y ‘Advanced Finendel hecoatng A Ciro Canepal &Precedre Aaproa ‘agreement whereby the drat ot the 3a, The arcratisin mintenance forthe ‘excmple, lease 76 . CHAPTER 9 SS a eS ‘Books of JOINT OPERATOR The Joumal ens for Eft J in 20x4, to copie Hts SHARE ofthe actives related tong Project -crcrat January 1,204: + The jet aFcrottiajint operation ++ The joint Gperation is @ way to share the cos's of having access to on aircraft + Each operator owns ashore of the acraf and benefits fom having the air it fr some days each year. ‘+ Each operator would recogrie is intrest in the joint operations, January 1 ~ December 31, 20x4: ‘+ The share in net income of Joint OperaterEnlly J-cmounted to P130,000, counting by an Unincorporated Joint Operation - Joint Opera's > the scale ofthe projec exceeded the capacity fenifiesX and ¥ inv, dered joint for @ publ conract wth a goverment fo corsuct o motoway ‘wo cies. Folowing the tender process the government. awarded the ca fo nies Kandy In cccordance with the contractual arangements enfies Xx ‘and ate jonty Contacte withthe goverment for delvery ofthe motorway in return for P4000 000, (otixed price contact t In 20x in accordance withthe ogeement between eniésX and fin operator * entities X ond Y each used thelr own equipment and employees in the constuction activiy ‘+ entity X constructed three bridges needed fo cross rivers on the route at a cos! of wherein separate Pa rnilion Is copra rca a vol ence, each jt operator 5 st +r element 6 kept, each joint o ot no, hence, ently costucted a ofthe other element of he moleway a @ costo sec enter ka pat et owetn Fotos it on freee A ‘Made by him. emer mio f ' received trom) the government ‘Advanced Financial Account m Pe ewer easy, An eccoa "metinat nt Oporto” led oe le a omic account re Towing scractos tak oC! Me OCCU WONG be gy Swe ; I the joint operation is completed: ‘+The bolonce of he Investment in Joint Operator ‘or oss. Credit balance represents prof and a det It joint operation is uncompleted: * Meoning there are sfll unsold merchandise, profit or loss o boloncing figure between the balances of the Investment in Joint Operation. account belore location prft allocation and the cost ofthe unsold merchandise (the requied debit bolance of the livesiment in Joint Operation account after profit o oss «location. 7 Cash Settlement Cosh settlement may also be represented by the joint operator's account Balance -ount represents the proft Jance representsioss, ee Bet, ‘Deo Mise oe ur 0 be at o 2e choses sony of, except that the ending abbMes od these oe dsouted equal between Berondl we at home. Mac agrees to pay P5000 elon ek iver wes akan by lfon ‘Allon agrees to consiuct a stand on the fron © Mac will be paid P2.500 for cer ter the one-month seling ‘ilocated fist by the = “vanced Financol Acounting ~A Compronsie Concapioall racdiood Doxcooie 780 CHAPTER g Joint Ventures though th tem ‘elt venue” troady Wed in roc Hs tm any defined in PFRS 11. {+ Jolt ventures must be accounied for ung ony the equly method under prys 0 * Ti wit rez in ecognitng ony asngle neem investment (ine ts anequty ‘method) ina jin venue inthe statement of fnancial potion, and a single, |tem for the proportionate share of net income and changes in equity in tne statement of comprehensive income, ‘+ Joint ventures are defined as joint arangements whereby “the parties hay control of the arangement and have right fo the net assets This wil normaly be estabished in the form of a seporat joint venture activities. +" Alpint venture soll recognize his/her ifeest ina jant venture as an invesiient {nd shall account for that investment using the equly method in accordance with PAS 28 Invesiments in Associales and Joint Ventures Unies the enfty 4 ‘exempted rom applying the equiy method ds spected in tha standar . ‘A patty that participates in, but does not have joint conto} ofc jeint venine shall accourt for Ws interes in the orargement in accordance wih PS Financial Instruments, unless it has signfcant influence over the jolt venture, 1 wich casei shal accoun fort in accordance with PAS 28. Joint Venture Agreements i The Jolt venture agreement speciies each co-venlve's capital contbuton, ‘epresentation the board of decors. and involvement in management, pls olhet relevant mates. - ‘An essential and distinguishing characteristic of a Joint veniyre is that no investor can ‘make majo srotegic decks onlateraly: moor decons requis the consent of alo the coventues.Thisisknownos ain contol. *+ Joint con! shouldnt be confused with prof sharing. Cont ji Bu prof sharing is not necessarily equal, sre agreement stipulates how the fk and benefis of he joint ted. including the disioutions of profits and dividends. + Usvaly jolnt ventures are carried on as separate private comorations. The jant venture agreement is smiar to stockhiders’ agreement in private corporations ‘hat claifies the rights and responsbilies ofthe various stockholders, ge 9-4: BXOMpI Joa cy [tna HO Jt Verne ipsummary there ore thre: jal of controt ‘he-consoidated income statement and other compiehensive income wilinclude + The-consoldated sharin fe joint vente’ net ress P ‘The Consolidated shar ofthe joint ventur's other comprehensive inc 1h use of the equily method should be discontinued ftom the date on which the venture ceases fo have.q joint contol over, o have sgniicant infvence, on a joint venture. = ‘economic boundaes ed through “conto” or “sgnifeant infuence” or ‘ewan buds ans tach oe ae peaing pofces of substi, asocties an ent vntves respecte, onthe, lev of reporing srequited depending on te financial stlemen's prepa ‘Accounting for Subsidies, Asociotet ond Joint Venues in the Parents Seporate Fhancial ialements res, sscioes ond ont venfres include in fmenis in sesso soa the corsoidated nancialstlerens tous Pe 4 Abeott or Vote Option). oF Mnaccorance win SFO og ‘Me Using equity metnod * nthe consotdated tnonciasolement he nts nthe ot venture entyyq be accounted for utng the equly method. hs eaiment of jl venti! onokited fancilsatements i hereore Identical tothe hacen gy ne associate. *+ Where subsres or cased os held for sal, they should be account ‘accordance with PRRS 5, + Ifan ently elects to account for hove investments In accordance with pas Financial Instument, he invesimentsshol be measwed al fa valve troyy, rofor loss ~FVTPL The flowing level of epeng is escibed Tobe 91, wherein @ patent company ‘produces Is own single economic franciol stafements or consolidated tnanccs stotements: her mecssement bos, fo received diocese iNet recogtesvidend income when, Table 9.1: Summarizes the Accouiig Treinen! requred ct each Levels of Reporng hes been exci, {or Consoidated Financial Stoterens (CF) Pt Rakes Invert sepacte | comotcoed | tealentn Imveent | _cateto | Renci Stmerts | onchtdctments | Geup Acct ry biG | Carl —| PT re cad | FS Fa Conia Gixerme) [a ets {cater ‘imal - nosaam | Sstel noisy (ieencettenen | 7 cowoldcedi 3 ing eG nchas | ese of pore “soca | Spiicad—[PATIAE meena | PASTS 1D | Ey occarng Irhowes | congo Ives tan-som) | Coster cca ving Eheamce | Rectynetot Front <_| tig tes 3 ld | enka ASE7ae as) | PS STRSTR ely ocr Vertue | arongamen | edn kcanedst | vednen Schl conal| Toe ecco hg om sim) | # mocaiece | he eguly meted a Sige toes Tressel | enor [PRS FF "ari cpa wes | ecrfon ot em rene | wean ‘reatove 7A conta ora Tl TI TOSS TO Po Yate Olen ‘Accounting Wreatment fora soln Venhre PFRS 11 presets that a Jolt venture shal recognize its Infeest in a joint venir o& t ns rom the Equly Method for using the eauty lnvesiment and shal account for that Invesimen! using the, equly. method come ‘accordance with PAS 28 Investments in Associates and Joint Ventures, unless the ently Is exempted from applying the equity method as specified in that standard ‘+The use of the equity method will result in recognizing only a single line lem. Investment Ina Jont venture inthe stalement of nancial postion, and shale J ——— oo ‘Avance Pose hsoctg =A Compr atns Canepa & Precederal Agproaeh ec al axscioes and i venues so be aa Pore trpes of enti, ch ce ete oot ote re mo ‘it sts on sina ent ne cis endo vrs tok ‘may elect to measure thet | 74 CHAPTER Pa HAT PG: 9 “ —Yalue trough prof or ioss in accordance with PFRS 9. + Wen avd, such entities need net ete eauty method of he Snag bul hey mut dels enorme moccarnce win PRS 2 The standard futher allows the election, fo measure a fait valve though prof orcs jy ‘be made on par ofthe investment that pa meets the condition above. 'A Company holds 0 15% ownesnp in C Company. 8 Company, a susciary of However ine remaining SR stoke held rectly by A Company must be accounted i by the equly method. For other enies the exemption ftom the equily method oppiles Gniy If the enfy i @ ‘parent tht is exempted om preparing consoldated nancial stalements oa ofthe following conditions ae met: «. The entity iso wholy-owned subsicary, ors parfialy-owned sutsicir of another regulatory organization, for: the purpose of pubic market: ond is fe parent of the. ently prodyces ‘valoble for public ise. that comply with d. The uimate or ony Consolidated financial state lan investment is acquired ard held exclusively for disposal, shall opp PFRS § and Classify tha invesiment os non-curent asset held fr salé. Smilay, severe restictions are No!‘@ sucent-condfion for not applying the equly ‘method when the investor continues to exercise signicant influence.” Significant influence must be ost before the equiy method ceases tobe appicable, Transactions between a Jon! Venturer and a Jol Venture business combinations Downstream Transactions ‘+ When 0 joint venturet puchases assets rom a joint venture, the joint verte ‘roid nol roars fs she of the rf made bythe jit venke oF he ‘ronsaction in queston unl reels he axsels oan independent thd pat unt the proft is realized. eae ieee * Fe nape de He No “Avance Finance Aeoanting ~ A Comprbeas Concptoc & Procedure haproed in the process of fing, is financial sotemens B+ Aloit orlos. Jy gna et 88 a verte so mating ot | thtlreect the bones ctor: ono econ foe ent ‘ny the gin ate en recogd no rnc one St et etn ok be ‘+ The full amount of any loss should be mout of any lo shoud be recogned hen the orwocton shows evidence tha the net eatzoble ee of cure sels han he ou tence Ra i mio €f caret cst ies than te cos, jon of Inercompany Poft/Goins and Losses and lots reiting fom “dorntean onc “upsteom ransoctlon beween o venture (nv, asocit)ickng Bs conldeled sbsidares ona Jl te xo elminfed oh exert ofthe ot verte ie ino vertu. is vey snd fo he procedure fe enaing hko-oup tonsetnsbelvaen 2 Tie rationcle unde his ful einai is tht a group of compories, being viowed. os a snge economic uni, conrot possbly generate resus by R the prof or oss on a investor jolt 6 tn ety cout, 8 atumad ls Pe kd pe evretie te ast ot yn is that an investor, when [ies te at sanscon & tin me i” ing wth Bs 030208 ab verte nd party wh i : eam eco ene « CHAPTER 9 Wn a (Other intercompany Transacions wah a Joint Venture Joint Venore's Losses ‘Won the eqully method being used by the joint ventur's share of losses ofthe [ont venfure equals or exceeds its inerests in joint vente. ie Joi vente should

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