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IFRS 11
JOINTARRANGEMENTS
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December 1989 Exposure Draft E35 Financial Reportingof Interests in Joint Ventures
December 1990 IAS 31 Financial Reporting of Interests inJoint Ventures
1 January 1992 Effective date of IAS 31 (1990)1994 IAS 31 was reformattedDecember 1998 IAS 31 was revised by IAS 39 effective 1
January 200118 December 2003 Revised version of IAS 31 issued by the
IASB
History of IAS 31
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1 January 2005 Effective date of IAS 31 (Revised2003)
13 September 2007 Exposure Draft ED 9 JointArrangements issued. Proposes toreplace IAS 31 with a newstandard titled JointArrangements.
10 January 2008 Some significant revisions of IAS 31were adopted as a result of theBusiness Combinations Phase IIProject relating to loss of joint
control
22 May 2008 IAS 31 amended for AnnualImprovements to IFRSs 2007 forcertain disclosures and reversals ofimpairment losses (equity method)
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1 January 2009 Effective date of the May2008 revisions to IAS 311 July 2009 Effective date of the
January 2008 revisions to IAS31
12 May 2011 IAS 31 is superseded by IFRS11 JointArrangements and IFRS 12Disclosure of Interests in OtherEntities effective 1 January2013
http://www.iasplus.com/en/standards/ifrs11http://www.iasplus.com/en/standards/ifrs11http://www.iasplus.com/en/standards/ifrs12http://www.iasplus.com/en/standards/ifrs12http://www.iasplus.com/en/standards/ifrs12http://www.iasplus.com/en/standards/ifrs12http://www.iasplus.com/en/standards/ifrs11http://www.iasplus.com/en/standards/ifrs11 -
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IAS 31 vs. IFRS 11
IAS 31 INTERESTS
IN JOINT VENTURE
IFRS 11 JOINT
ARRANGEMENTS
Joint Venture - a
contractualarrangementwhereby two ormore parties
undertake aneconomic activitythat is subject to
joint control
Joint Arrangement
= an arrangementwhere two ormore partiescontractually
agree to sharecontrol
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A joint arrangement has the following
characteristics:
The parties are bound by a
contractual arrangement, and
The contractual arrangement givestwo or more of those parties joint
control of the arrangement.
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JOINT CONTROL = the contractually agreedsharing of control of an arrangement, which
exists only when decisions about therelevant activities require the unanimousconsent of the parties sharing control.
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IAS 31 vs. IFRS 11IAS 31
INTERESTS
IN JOINT VENTUREIFRS 11
JOINT
ARRANGEMENTS
Types:
Jointlycontrolled assets
Jointlycontrolledoperations
Jointlycontrolled
entities
Types:
Joint operation
Joint venture
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IAS 31 vs. IFRS 11
IAS 31
INTERESTSIN JOINT VENTURE IFRS 11
JOINTARRANGEMENTS
Jointly controlledoperations involve the use
of assets and otherresources of the venturersrather than theestablishment of aseparate entity
Joint operation Gives parties to the
arrangement directrights to the assetsand obligations forthe liabilities
Parties are called joint
operators Will follow acctg
much like that for jointassets or jointoperations
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IAS 31 vs. IFRS 11
IAS 31 INTERESTS IN
JOINT VENTURE
IFRS 11 JOINT
ARRANGEMENTS
Jointly controlled assets
involve the jointcontrol, and often the
joint ownership, ofassets dedicated to
the joint venture.
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IAS 31 vs. IFRS 11
IAS 31 INTERESTS
IN JOINT VENTURE
IFRS 11 JOINT
ARRANGEMENTS
jointly controlled entity is a corporation,
partnership, or otherentity in which two ormore venturers havean interest, under a
contractualarrangement thatestablishes joint controlover the entity.
A joint venture
is a joint arrangementwhereby the partiesthat have joint controlof the arrangementhave rights to the net
assets of thearrangement.
Those parties arecalled joint venturers.
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IAS 31 vs. IFRS 11
IAS 31 INTERESTS
IN JOINT VENTURE
IFRS 11 JOINT
ARRANGEMENTS
jointly controlled
entity Proportionate
consolidation or Equity method
A joint venture
Equity methodonly
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Structured through anentity
Not structured through anentity
Jointlycontrolledoperations
Jointlycontrolled
assets
Jointly controlled entities
Accounting for assets,liabilities, revenues and
expenses in accordancewith the contractual
arrangements
Proportionateconsolidation
Equitymethod
option
IAS 31: What needed to be improved?
Structure of the joint arrangement The structure ofthe arrangement is
the onlydriver for
the accounting
When
arrangements are
structured inentities, preparers
have an
account ing
opt ion
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IFRS 11: The assessments required
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JOINT CONTROL
Do all the parties, or a group of
the parties, havejoint control
over the arrangement?
TYPE OF
JOINT ARRANGEMENT
Analysis of the parties rights
and obligations arising from the
arrangement
Outside thescope of IFRS 11
No
Yes
Joint operation
Joint venture
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IFRS 11: Assessing joint control
Does the contractual arrangement
give all the parties, or a group of theparties, control of the arrangement
collectively?
Outside thescope ofIFRS 11
No
Yes
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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IFRS 11: Assessing joint control
Does the contractual arrangement
give all the parties, or a group of theparties, control of the arrangement
collectively?
Do decisions about the relevant
activities require the unanimous
consent of all the parties, or of a group
of the parties, that collectively control
the arrangement?
Outside thescope ofIFRS 11
No
Yes
Yes
No Outside thescope ofIFRS 11
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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IFRS 11: Assessing joint control
Does the contractual arrangement
give all the parties, or a group of theparties, control of the arrangement
collectively?
Do decisions about the relevant
activities require the unanimous
consent of all the parties, or of a group
of the parties, that collectively control
the arrangement?
The arrangement isjointly controlled.
The arrangement is ajoint arrangement.
Outside thescope ofIFRS 11
No
Yes
Yes
No Outside thescope ofIFRS 11
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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IFRS 11: Assessing the classification
Analysis of the parties
rights and obligationsarising from the
arrangement
Jointoperation
Joint
venture
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Assess the parties rights andobligations arising from the
arrangementby considering:
(a) thelegal form of the separatevehicle
(b) the terms of the contractualarrangement, and, if relevant,
(c) otherfacts and circumstances
Joint operation Joint venture
Assessment
of the
parties
r ights and
obl igat ions
Accounting forassets, liabilities, revenuesand expenses in accordance with the
contractual arrangements
Accounting for aninvestment using the
equity method
Not structured through a
separate vehicle *
Structured through a
separate vehicle *
Parties have rights
to the net assets
Parties have rights to the assets
and obligations for the liabilities
Account ing
ref lects
the parties
r ights and
obl igat ions
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.
20IFRS 11: Assessing the classification
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A separate vehicle is a separately identifiable
financial structure, including separate legal entities
or entities recognised by statute, regardless ofwhether those entities have a legal personality.
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Joint operation
IFRS 11: Assessing the classification
Account forassets, liabilities, revenues andexpenses in accordance with the contractual
arrangements
Not structured through a separate vehicle
Parties have rights to
the assets and
obligations for the
liabilities
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Consider: - the legal form of the separate vehicle,- the terms of the contractual arrangement,- when relevant, otherfacts and
circumstances
Joint operationJoint venture
IFRS 11: Assessing the classification
Account forassets,liabilities, revenues and
expenses
Account for an investmentusing the equity method
Structured through a separate vehicle
Parties have rights
to the net assets
Parties have rights to the assets
and obligations for the liabilities
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2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Terms of thecontractual
arrangement
Other facts andcircumstances
Legal form of
the separatevehicle
Does the legal form of the separate
vehicle give the parties rights to the assetsand obligations for the liabilities, relating
to the arrangement?
Do the terms of the contractualarrangement specify that the parties
have rights to the assets, and obligations
for the liabilities, relating to thearrangement?
Yes
Yes
No
Have the parties designed thearrangement so that
(a) its activities primarily aim to providethe parties with an output (ie the
parties have rights to substantially allthe economic benefits of the assetsheld in the separate vehicle) and
(b) (b) it depends on the on the partieson a continuous basis for settling the
liabilities relating to the activityconducted through the
arrangement?
No
No
Yes
Joint Venture
JointOperatio
n
IFRS 11: Assessing the classification
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IFRS 12: Disclosures for joint arrangements
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Jointoperations
Jointventures
Summarised financial information foreach individually material joint ventureand in total for all other joint ventures.
Description of the nature, extent and the financial effectsof an entitys interests in joint arrangements
2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org