Professional Documents
Culture Documents
Associates and Joint Arrangements
Associates and Joint Arrangements
Accounting for
joint arrangements
and associates
Joint World Bank and IFRS Foundation train the
trainers workshop hosted by the ECCB,
30 April to 4 May 2012
IFRS 11
Joint Arrangements
Introduction
Principle
Classification
6
Structured through a
separate vehicle *
Assessment
of the parties
rights and
obligations
Joint operation
Joint venture
Accounting for an
investment using the
equity method
(*): A separate vehicle is a separately identifiable financial structure, including separate legal entities or entities recognised by
statute, regardless of whether those entities have a legal personality.
Accounting
reflects
the parties
rights and
obligations
Separate vehicles
Contractual
terms
Other
Yes
No
Do the parties have contractual rights to
the assets, and obligations for the
Yes
liabilities?
No
Is the arrangement designed so:
a) Its activities primarily aim to provide
parties with an output, and
(b) It depends on the parties for settling
liabilities?
No
Joint Venture
Yes
Joint Operation
Legal form
Example:
Construction and real estate
A separate vehicle is established, over which two
parties have joint control.
The purpose of the Joint Arrangement is to construct
and sell residential units to the public
Neither the legal form nor the contractual terms give
the parties rights to the assets or obligations for the
liabilities of the arrangement
Contributed equity by the parties is sufficient to buy
the land and raise debt finance for the construction
Sales proceeds will be used to repay external debt
and remaining profit is distributed to parties
Parties provide guarantee to financier
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Example:
Mining
10
11
improves consistency
it provides the same accounting outcome for each type of joint
arrangement
12
IFRS 12
Disclosure of Interests in
Other Entities
Objective
14
Requirements
15
Disclosures
significant judgements and assumptions made
information about interests in:
subsidiaries
joint arrangements and associates
16
Nature of, and changes in, the risks associated with the
involvement
Commitments and contingent liabilities
16
17
IAS 28
Investments in Associates
and Joint Ventures
19
Significant influence
20
21
Measurement
22
Measurement rule
Associates and joint ventures are accounted for using
the equity method.
Exemptions from the equity method
Entity is a parent and the scope exemption in paragraph
4(a) of IFRS 10
A venture capital organisation or similar entity can elect
to measure its investments in associates or joint
ventures at fair value through profit or loss in
accordance with IFRS 9.
IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Equity method
23
Example
equity method
24
25
26
27
28
29
30
Questions or comments?
Expressions of individual views
by members of the IASB and its
staff are encouraged.
The views expressed in this
presentation are those of the
presenter.
Official positions of the IASB on
accounting matters are
determined only after extensive
due process and deliberation.
IFRS
Foundation
| 30 Cannon Street
| LondonStreet
EC4M 6XH
| UK. EC4M
www.ifrs.org
2012
IFRS Foundation
| 30 Cannon
| London
6XH | UK | www.ifrs.org
3131
32
2011
IFRS Foundation
| 30 Cannon
Street
| London
EC4M
6XH | UK.
www.ifrs.org
IFRS Foundation
| 30
Cannon
Street
| London
EC4M
6XH | UK | www.ifrs.org