NAME
BSA12KB1
PFRS 11 - JOINT ARRANGEMENTS
Joint Arrangement - an arrangement of
which 2 or more parties have joint control
Joint Control - 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
3 basic elements of Joint Control:
1. Contractual arrangement - establishes
joint control over the joint arrangement
2. Sharing of control - this condition or
element is met when all parties, or group
of parties, considered collectively, are able
to direct the relevant decisions of the
arrangement.
*No single party can decide on its own.
3. Unanimous consent - means that every
party of the joint arrangement must agree
with (or at least does not object to) the
decision and no one can block it
Types of Joint Arrangement:
1. Joint venture- the parties having joint
control have rights to the net assets of the
arrangement. These parties are called
“joint venturers”.
2. Joint operation- the parties having joint
control have rights to the assets and
obligations for the liabilities relating to the
arrangement. These parties are called
“joint operators”.
Distinguish Joint Venture between Joint
Operations:
-The classification depends upon the rights
and obligations arising from the joint
arrangement.
- Is the arrangement is structured through
separate vehicle or not?
• When the joint arrangement is structured
through separate vehicle, then it can
be either joint venture or joint operation.
For making your conclusion, you should
examine further:
• The legal form of joint arrangement;
• The terms of the contractual
arrangement; and
• Other facts and circumstances when
relevant.
• When a joint arrangement is NOT
structured through a separate vehicle,
then the classification is easy: it is a clear
joint operation.
Methods of Accounting:
Joint Venture - Equity Method
Joint Operation - should recognize in the
financial statements:
• Its assets, including its share of any
assets held jointly;
• Its liabilities, including its share of any
liabilities incurred jointly;
• Its revenue from the sale of its share of
the output arising from the joint
operation;
• Its share of the revenue from the sale of
the output by the joint operation; and
• Its expenses, including its share of any
expenses incurred jointly.
Presentation in statement of financial
position:
Investments accounted for under equity
method - presented as non current assets
except when they are classified as held for
sale