Chapter 15

Chapter 15
JOINT ARRANGEMENTS Formatted: Font color: Auto

Formatted: Font: 12 pt, Font color: Auto
Formatted: Font: 12 pt
Sec. 1. Withdrawal and Replacement of PPSAS 8. PPSAS 37, Joint Arrangements,

effective for annual financial statements covering periods beginning January 1, 2017,
supersedes PPSAS 8, Interests in Joint Ventures as provided under COA Resolution No.
2017-006 dated April 26, 2017, requiring the adoption of additional six (6) Philippine Public
Sector Accounting Standards (PPSASs) and uUpdates on PPSAS prescribed per COA
Resolution No. 2014-003 dated January 24, 2014 in accordance with the 2016 Edition of the
Handbook of International Public Sector Accounting Pronouncements (HIPSAP) published
by the International Federation of Accountants (IFAC).
Therefore, a Government Corporation (GC) classified as Non-Government Business

Enterprises (GBE) shall apply the provisions of PPSAS 37 whenever it has an interests in
arrangements that are controlled jointly.
Sec. 2. Scope. This Chapter covers the determination of the type of joint arrangement Formatted: Font: 12 pt, Font color: Auto
in which a GC classified as Non-GBE is involved by assessing its rights and obligations, and
the accounting for those rights and obligations in accordance with that type of joint
arrangement. Formatted: Font: 12 pt
Sec. 3. Definition of Terms. For the purpose of this Manual, the terms used as stated
below shall be construed to mean as follows: (Par. 7, PPSAS 37)
a. Binding arrangement – is an arrangement that confers enforceable rights and
obligations on the parties to it as if it were in the form of a contract. It includes
rights from contracts or other legal right.
b. Entity – refers to a government corporation or operating/field unit. It is referred in Formatted: Indent: Left: 0.5", Numbered + Level: 1 +
this GAM as GC classified as Non-GBE. Numbering Style: a, b, c, … + Start at: 1 + Alignment:
Left + Aligned at: 1.38" + Tab after: 1.63" + Indent at:
b.c. Joint arrangement – is an arrangement of which two or more parties have joint 1.63", Tab stops: Not at 1.63"
control. Formatted: Font: Not Italic
Formatted: Font: 12 pt, Font color: Auto, Indonesian
c.d. Joint control – is the agreed sharing of control of an arrangement by way of a
binding arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control.
d.e. Party to a joint arrangement – is an entity that participates in a joint arrangement,

regardless of whether that entity has joint control of the arrangement.
e.f. Separate Vehicle – is a separately identifiable financial structure, including

separate legal entity or entities recognized by statute, regardless of whether those
entities have a legal personality.
256
Sec. 4. Binding Arrangement. A binding arrangement is often, but not always, in Formatted: Font: 12 pt
writing, in the form of a contract or documented discussions between the parties. (Par. 8, Formatted: Font: 12 pt, Font color: Auto
PPSAS 37) When joint arrangements are structured through a separate vehicle, the binding
arrangement, or some aspects of the binding arrangement, will in some cases be incorporated
in the articles, charter or by-laws of the separate vehicle. (AG 3, PPSAS 37)
The binding arrangement sets out the terms upon which the parties participate in the
Formatted: Font color: Auto
activity that is the subject of the arrangement. The binding arrangement generally deals with
such matters as: (AG 4, PPSAS 37) Formatted: Font: 12 pt
Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
Numbering Style: a, b, c, … + Start at: 1 + Alignment:
b.a. Purpose, activity and duration of the joint arrangement. Left + Aligned at: 1.38" + Tab after: 1.63" + Indent at:
1.63", Tab stops: Not at 1.63"
c.b. How the members of the board of directors, or equivalent governing body, of the Formatted: Tab stops: Not at 1.63"
joint arrangement, are appointed. Formatted: Indent: Left: 0", First line: 0.5", Numbered
+ Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 +
d. The decision-making process: the matters requiring decisions from the parties, Alignment: Left + Aligned at: 1.75" + Tab after: 2" +
the voting rights of the parties and the required level of support for those matters. Indent at: 2", Tab stops: Not at 2"
Formatted: Indent: Left: 0.5"
f.c. The decision-making process reflected in the binding arrangement establishes Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
joint control of the arrangement. Numbering Style: a, b, c, … + Start at: 1 + Alignment:
g.d. The capital or other contributions required of the parties. 1.63", Don't adjust space between Latin and Asian text,
Don't adjust space between Asian text and numbers,
Tab stops: Not at 1.63"
h.e. How the parties share assets, liabilities, revenues, expenses or surplus or deficit
relating to the joint arrangement. Formatted: Indent: Left: 0.81", Don't adjust space
between Latin and Asian text, Don't adjust space
between Asian text and numbers
Sec. 5. Joint Arrangements. A joint arrangement is either a joint operation or a joint
venture. It has the following characteristics: Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
a. The parties are bound by a binding arrangement. 1.63", Don't adjust space between Latin and Asian text,
Don't adjust space between Asian text and numbers,
b. The binding arrangement gives two or more parties joint control of the Tab stops: Not at 1.63"
arrangement. Formatted: Font: 12 pt
Sec. 5.Sec. 6. Assessment of Joint Control. An entity GC classified as Non-GBE
that is a party to an arrangement shall assess whether it has joint control over an arrangement Formatted: Font: 12 pt
and should use the matrix below as a guide: Formatted: Font: 9 pt
No
Does the binding arrangement give all the Formatted: Font: 9 pt
Outside the scope
parties, or a group of the parties, control of Formatted: Font: 12 pt
of PPSAS 37
the arrangement collectively?
Yes Formatted: Font: 9 pt
Do decisions about the relevant activities Formatted: Font: 12 pt
require the unanimous consent of all the Outside the scope
parties, or of a group of the parties, that of PPSAS 37 Formatted: Font: 12 pt
collectively control the arrangement? No
Yes Formatted: Font: 12 pt
The arrangement is jointly controlled: the arrangement
is a joint arrangement 257
Formatted: Indent: Left: 0"
Formatted: Indent: Left: 0"
Formatted: Normal
a. In assessing whether an entity has joint control of an arrangement, an entity shall Formatted: Font: 12 pt
assess first whether all the parties, or a group of the parties, control the
Formatted: Normal, Indent: Left: 0.56", Numbered +
arrangement. When all the parties, or a group of the parties, considered Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
collectively, are able to direct the activities that significantly affect the benefits Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
from the arrangement (i.e., the relevant activities), then, the parties control the + Indent at: 1.63", Don't adjust space between Latin
arrangement collectively. (AG 56, PPSAS 37) and Asian text, Don't adjust space between Asian text
and numbers, Tab stops: Not at 1.63"
b. After concluding that all the parties, or a group of the parties, control the Formatted: Font: (Default) Times New Roman, Font
arrangement collectively, an entity shall assess whether it has joint control of the color: Auto
arrangement. Joint control exists only when decisions about the relevant Formatted: Font: 12 pt
activities require the unanimous consent of the parties that collectively control Formatted: Normal, Indent: Left: 0.56", Numbered +
the arrangement. Assessing whether the arrangement is jointly controlled by all Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
of its parties or by a group of the parties, or controlled by one of its parties alone, Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
can require judgment. (AG 6, PPSAS 37) + Indent at: 1.63", Don't adjust space between Latin
and Asian text, Don't adjust space between Asian text
c. Sometimes the decision-making process that is agreed upon by the parties in their and numbers, Tab stops: Not at 1.63"
binding arrangement implicitly leads to joint control. In other circumstances, the Formatted: Normal, Indent: Left: 0.56", Numbered +
binding arrangement requires a minimum proportion of the voting rights to make Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
decisions about the relevant activities. When that minimum required proportion Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
+ Indent at: 1.63", Don't adjust space between Latin
of the voting rights can be achieved by more than one combination of the parties
agreeing together, that arrangement is not a joint arrangement unless the binding and numbers, Tab stops: Not at 1.63"
arrangement specifies which parties (or combination of parties) are required to
agree unanimously to decisions about the relevant activities of the arrangement.
(AG 7&8, PPSAS 37)
d. The following illustrative examples will show how joint control may be assessed: Formatted: Normal, Indent: Left: 0.56", Numbered +
Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
Illustrative Example 1: Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
Corporation A and Corporation B establish an arrangement in which each + Indent at: 1.63", Don't adjust space between Latin
has 50% of the voting rights and their binding arrangement specifies that at
and numbers, Tab stops: Not at 1.63"
least 51% of the voting rights are required to make decisions about the
relevant activities of the arrangement.
In this case, the parties have implicitly agreed that they have joint control
of the arrangement because the decisions about the relevant activities
cannot be made without both parties agreeing.
258
Illustrative Example 2: Formatted: Indent: Left: 0.56", First line: 0.25"
Corporations A, B and C establish an arrangement. Corporation A has Formatted: Indent: Left: 1.25"
50% of the voting rights in the arrangement, Corporation B has 30% and
Corporation C has 20%. The binding arrangement among the corporations
specifies that at least 75% of the voting rights are required to make
decisions about the relevant activities of the arrangement.
Even though Corporation A can block any decision, it does not control the Formatted: Indent: Left: 1.25"
arrangement because it needs the agreement of Corporation B. The terms
of their binding arrangement requiring at least 75% of the voting rights to
make decisions about the relevant activities imply that Corporation A and
B have joint control of the arrangement because decisions about the
relevant activities of the arrangement cannot be made without both
Corporation A and B agreeing.
Formatted: Font: (Default) Times New Roman, Font
Illustrative Example 3: color: Auto
Corporation A, B and C establish an arrangement. Corporation A has 50% Formatted: Font: 12 pt
of the voting rights in the arrangement, and Corporation B and Corporation
Formatted: Indent: Left: 0.56", First line: 0.25"
C each have 25%. The binding arrangement among the corporations
specifies that at least 75% of the voting rights are required to make Formatted: Indent: Left: 1.25"
decisions about the relevant activities of the arrangement.
Even though Corporation A can block any decision, it does not control the Formatted: Font: (Default) Times New Roman, 12 pt,
arrangement because it needs the agreement of either Corporation B or Font color: Auto
Corporation C. In this example, Corporations A, B and C collectively Formatted: Indent: Left: 1.25"
control the arrangement. However, there is more than one combination of
parties that can agree to reach 75% of the voting rights (i.e., either
Corporations A and B or Corporations A and C). In such situation, to be a
joint arrangement, the binding arrangement between the parties would
need to specify which combination of the parties is required to agree
unanimously to decisions about the relevant activities of the arrangement.
Illustrative Example 4: Formatted: Indent: Left: 0.56", First line: 0.25"

Corporation A and B each have 35% of the voting rights in the Formatted: Indent: Left: 1.25"
arrangement with the remaining 30% being widely dispersed. Decisions
about the relevant activities require approval by a majority of the voting
rights.
Corporation A and B have joint control of the arrangement only if the Formatted: Indent: Left: 1.25"
binding arrangement specifies that decisions about the relevant activities
of the arrangement require both Corporation A and B agreeing.
In accordance with the matrix above, when an arrangement is outside the scope Formatted: Normal, Indent: Left: 0.56", Numbered +
of PPSAS 37, Joint Arrangements, an entity accounts for its interest in the Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
arrangement in accordance with the relevant PPSASs such as PPSAS 35- Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
Consolidated Financial Statements, PPSAS 36-Investments in Associates and + Indent at: 1.63", Don't adjust space between Latin
Joint Ventures and PPSAS 29-Financial Instruments: Presentation..
and numbers, Tab stops: 1.38", Left + Not at 1.63"
e.
259
Formatted: Indent: First line: 0"
Sec. 6.Sec. 7. Types of Joint Arrangements. After assessing whether joint control
Formatted: Font: (Default) Times New Roman, 12 pt,
exist in an arrangement entered into by an entitya GC classified as Non-GBE, it shall now
Font color: Auto, English (United States)
determine the type of joint arrangement in which it is involved as either as joint operations or
joint ventures and shallould be guided by the matrix below: Formatted: Font: (Default) Times New Roman, 12 pt,
Font color: Auto, English (United States)
Structure of the Joint Arrangement

Font color: Auto
Not structured through a separate Formatted: Font: 12 pt
Structured through a separate vehicle
vehicle
An entity shall consider:

(i) The legal form of the
separate vehicle;
(ii) The terms of the binding
arrangement; and
(iii) When relevant, other facts
and circumstances
Joint Operation Joint Venture
a. Joint arrangements are established for a variety of purposes (e.g., as a way to Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
share costs and risks, or as a way to provide the parties with access to new Numbering Style: a, b, c, … + Start at: 1 + Alignment:
technology or new markets) and can be established using different structures and Left + Aligned at: 1.38" + Tab after: 1.63" + Indent at:
legal forms. (AG 12, PPSAS 37) 1.63", Tab stops: 6.25", Left + Not at 1.63"
260
b. PPSAS 37 classifies joint arrangements as either joint operations or joint Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
ventures. The classification of a joint arrangement as a joint operation or joint Numbering Style: a, b, c, … + Start at: 1 + Alignment:
venture depends upon the rights and obligations of the parties to the arrangement. Left + Aligned at: 1.38" + Tab after: 1.63" + Indent at:
When an entity has rights to the assets, and obligations for the liabilities, relating 1.63", Tab stops: 6.25", Left + Not at 1.63"
to the arrangement, the arrangement is a joint operation. When an entity has
rights to the net assets of the arrangement, the arrangement is a joint venture. (AG
14, PPSAS 37)
c. The above matrix sets out the assessment an entity GC classified as Non-GBE Formatted: Font: 12 pt
should carry out to determine whether it has an interest in a joint operation or an Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
interest in a joint venture. Guidance for the assessment are the Numbering Style: a, b, c, … + Start at: 1 + Alignment:
following:explained as follows: Left + Aligned at: 1.38" + Tab after: 1.63" + Indent at:
1.63", Tab stops: 6.25", Left + Not at 1.63"
1. As stated earlier, cClassifying a joint arrangement requires the parties to
assess their rights and obligations arising from the arrangement. When
making that assessment, the first thing to consider is the structure of the joint
arrangement.
2. A joint arrangement not structured through a separate vehicle is a joint Formatted: Indent: Left: 0.81"
operation. In such cases, the binding arrangement establishes the parties’
rights to the assets, and obligations for the liabilities, relating to the
arrangement, and the parties’ rights to the corresponding revenues and
obligations for the corresponding expenses. (AG 16, PPSAS 37)
3. AConsequently, a joint arrangement in which the assets and liabilities Formatted: Indent: Left: 0.81"
relating to the arrangement are held in a separate vehicle can be either a joint
venture or a joint operation. Whether a party is a joint operator or a joint
venture depends on the party’s rights to the assets, and obligations for the
liabilities, relating to the arrangement, that are held in a separate vehicle. (AG
19-20, PPSAS 37)
4. When the parties have structured a joint arrangement in a separate vehicle, Formatted: Indent: Left: 0.81"
the parties need to assess whether the legal form of the separate vehicle, the
terms of the binding arrangement and, when relevant, any other facts and
circumstances give them either the rights to the assets, and obligations for the
liabilities, relating to the arrangement leading to its classification as a joint
operation or rights to the net assets of the arrangement classifying the joint
arrangement as a joint venture. (AG 21, PPSAS 37)
5. The legal form of the separate vehicle assists in the initial assessment of the Formatted: Indent: Left: 0.81"
parties’ rights to the assets and obligations for the liabilities held in the
separate vehicle, such as whether the parties have interests in the assets held
in the separate vehicle and whether they are liable for the liabilities held in
the separate vehicle. (AG 22, PPSAS 37)
6. In many cases, the rights and obligations agreed to by the parties in their Formatted: Font: (Default) Times New Roman, 12 pt,
binding arrangement are consistent, or do not conflict, with the rights and Font color: Auto
obligations conferred on the parties by the legal form of the separate vehicle Formatted: Indent: Left: 0.81"
in which the arrangement has been structured. In other cases, the parties use
the binding arrangement to reverse or modify the rights and obligations
261
conferred by the legal form of the separate vehicle in which the arrangement
has been structured. (AG 25-26, PPSAS 37) Formatted: Font: 12 pt
6. Formatted: Default, Justified, Indent: Left: 0.81",
Numbered + Level: 1 + Numbering Style: 1, 2, 3, … +
Start at: 1 + Alignment: Left + Aligned at: 0.75" +
Illustrative Example 5: Indent at: 1"
Corporation A and Corporation B structured a joint arrangement in an
incorporated entity, Corporation AB. Each party has a 50% ownership
interest in Corporation AB. The incorporation enables the separation of
the Corporation AB from Corporations A and B and as a consequence
the assets and liabilities held by Corporation AB are its own assets and
liabilities.
In such a case, the assessment of the rights and obligations conferred

upon the parties by the legal form of the separate vehicle, Corporation
AB, indicates that Corporations A and B have rights to the net assets of
the arrangement – therefore the joint arrangement is a joint venture.
However, the Corporations A and B modify the features of

Corporation AB through their binding arrangement so that each has an
interest in the assets and each is liable for the liabilities of Corporation
AB in a specified proportion.
Such binding modifications to the features of Corporation AB can

cause an arrangement to be a joint operation.
7. When the terms of the binding arrangement do not specify that the parties Formatted: Indent: Left: 0.81"
have rights to the assets, and obligations for the liabilities, relating to the
arrangement, the parties shall consider other facts and circumstances to assess
whether the arrangement is a joint operation or a joint venture. (AG 29,
PPSAS 37)
A joint arrangement might be structured in a separate vehicle whose Formatted: Indent: Left: 1.06", First line: 0.44"
legal form confers separation between the parties and the separate vehicle.
The binding terms agreed among the parties might not specify the parties’
rights to the assets and obligations for the liabilities, yet consideration of
other facts and circumstances can lead to such an arrangement being
classified as a joint operation. This will be the case when other facts and
circumstances give the parties rights to the assets, and obligations for the
liabilities, relating to the arrangement. (AG 30, PPSAS 37)
When the activities of an arrangement are primarily designed for the Formatted: Indent: Left: 1.06", First line: 0.44"
provision of output to the parties, this indicates that the parties have rights to
substantially all the service potential or economic benefits of the assets of the
arrangement. The parties to such arrangements often ensure their access to
the outputs provided by the arrangement by preventing the arrangement from
selling output to third parties. (AG 31, PPSAS 37)
Formatted: Font: (Default) Times New Roman, Font
color: Auto
262
The effect of an arrangement with such a design and purpose is that the Formatted: Font: (Default) Times New Roman, 12 pt,
liabilities incurred by the arrangement are, in substance, satisfied by the cash Font color: Auto
flows received from the parties through their purchases of the output. When Formatted: Indent: Left: 1.06", First line: 0.44"
the parties are substantially the only source of cash flows contributing to the
continuity of the operations of the arrangement, this indicates that the parties
have an obligation for the liabilities relating to the arrangement. (AG 32,
PPSAS 37) Formatted: Font: 12 pt
8. The following additional matrix reflects the assessment that an entity GC Formatted: Indent: Left: 0.81", Numbered + Level: 1 +
classified as Non-GBE follows to classify an arrangement when the joint Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment:
arrangement is structured through a separate vehicle: Left + Aligned at: 0.75" + Indent at: 1"
Does the legal form of the separate Formatted: Indent: First line: 0"
vehicle give the parties rights to the
Legal form of the
assets, and obligations for the Formatted: Font: 10 pt
separate vehicle liabilities, relating to the
arrangement? Yes Formatted: Font: 12 pt, Font color: Auto
No
Do the terms of the binding

Terms of the arrangement specify that the parties
binding have rights to the assets, and
arrangement obligations for the liabilities, Yes
relating to the arrangement? Joint
Operation
No
Have the parties designed the

arrangement so that:
Other facts and a. Its activities primarily aim to
circumstances provide the parties with an
output (i.e., the parties have
rights to substantially all of the
service potential or economic
benefits of the assets held in the Yes
separate vehicle) and
b. It depends on the parties on a
263 for setting the
continuous basis
liabilities relating to the activity
conducted through the
arrangement?
No
Sec. 8. Financial Statements of Parties to a Joint Operationor. Formatted: Line spacing: Multiple 0.5 li
Sec. 7.a. A Font color: Auto, English (United States)
joint operator, a party to a joint operation that has joint control of that joint Formatted: Font: 12 pt, Font color: Auto, English
operation, shall recognize in relation to its interest in a joint operation: (United States)
Formatted: Font: (Default) Times New Roman, 12 pt
a.1. Its assets, including its share of any assets held jointly;
b.2. Its liabilities, including its share of any liabilities incurred jointly;
c.3. Its revenue from the sale of its share of the output arising from the joint Formatted: Indent: Left: 0.5", No bullets or
operation; Formatted: Font: (Default) Times New Roman, 12 pt,
d.4. Its share of the revenue from the sale of the output by the joint operation; and Font color: Auto
e.5. Its expenses, including its share of any expenses incurred jointly. Formatted: Default, Indent: Left: 0.56", Numbered +
Level: 1 + Numbering Style: a, b, c, … + Start at: 1 +
b. A joint operator shall account for the assets, liabilities, revenues and expenses Alignment: Left + Aligned at: 1.38" + Tab after: 1.63"
relating to its interest in a joint operation in accordance with the PPSASs + Indent at: 1.63", Tab stops: 6.25", List tab + Not at
applicable to the particular assets, liabilities, revenues and expenses. 1.63"
c. When an entity GC classified as Non-GBE enters into a transaction with a joint Formatted: Font: 12 pt, Font color: Auto
operation in which it is a joint operator, such as a sale or contribution of assets, it
Formatted: Indent: Left: 0.81", Numbered + Level: 1 +
is conducting the transaction with the other parties to the joint operation and, as Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment:
such, the joint operator shall recognize gains and losses resulting from such a Left + Aligned at: 0.75" + Indent at: 1"
transaction only to the extent of the other parties’ interests in the joint operation.
When such transactions provide evidence of a reduction in the net realizable
value of the assets to be sold or contributed to the joint operation, or of an Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
impairment loss of those assets, those losses shall be recognized fully by the joint
operator. (AG 34-35, PPSAS 37) 1.63", Tab stops: 6.25", List tab + Not at 1.63"
Likewise, when it enters into a transaction with a joint operation in which it is
a joint operator, such as a purchase of assets, it shall not recognize its share of the Formatted: Indent: Left: 0.56", Numbered + Level: 1 +
gains and losses until it resells those assets to a third party. When such Numbering Style: a, b, c, … + Start at: 1 + Alignment:
transactions provide evidence of a reduction in the net realizable value of the
1.63", Tab stops: 6.25", List tab + Not at 1.63"
assets to be purchased or of an impairment loss of those assets, a joint operator
shall recognize its share of those losses. (AG 36-37, PPSAS 37)
Illustrative Example 6: Formatted: Indent: First line: 0.19"
Corporations A and B tendered jointly for a public contract with an LGU to
construct a motorway between two municipalities. Following the tender
process, the LGU awarded the contract jointly to Corporations A and B. In
accordance with the contractual arrangements, Corporations A and B are
264
jointly contracted with the LGU for delivery of the motorway in return for a
fixed price contract of P16 million.
In accordance with the agreement between Corporations A and B:
1. Corporations A and B each used their own equipment and employees in Formatted: Font: (Default) Times New Roman, 12 pt,
the construction activity: Font color: Auto, English (United States)
2. Corporation A constructed three bridges needed to cross rivers on the
Formatted: Indent: Left: 1.19", Tab stops: 4.75", Left +
route at a cost of P5 million; Not at 1" + 1.31"
3. Corporation B constructed all of the other elements of the motorway at Formatted: Line spacing: Multiple 0.5 li
a cost of Formatted: Indent: Left: 1.19", Tab stops: 4.75", Left +
P7 million; and Not at 1" + 1.31"
4. Corporations A and B shared equally in the P16 million jointly invoiced Formatted: Indent: Left: 1.19", Tab stops: 4.75", Left +
from the LGU. Not at 1" + 1.31"
The journal entries in the joint operator’s books to account for their Formatted: Indent: First line: 0.25"
interests in the joint operation are as follows:
Account Title Account Code Debit Credit

Corporation A
Construction in Progress-
Infrastructure Assets 106989020 P5,000,000 Formatted: Font color: Auto
Cash in Bank-Local Currency,
Current Account 10102020 P5,000,000
To recognize payment for the construction cost incurred for putting up three
bridges
Road Networks 10603010 P5,000,000

To recognize completion of construction of three bridges

Road Networks 10603010 P5,000,000
Other Business Income 40202990 3,000,000
To recognize the revenue earned and the turn-over to LGU of the completed
three bridges
Corporation B
To recognize payment for the construction cost incurred for putting up the
all other elements of the motorway
Road Networks 10603010 P7,000,000

Cash in Bank-Local Currency, 10102020 P7,000,000
265
Account Title Account Code Debit Credit
Current Account
To recognize construction cost incurred for building all of the other
elements of the motorway

Road Networks 10603010 P7,000,000
Other Business Income 40202990 1,000,000
To recognize the revenue earned and the turn-over to LGU of the completed
elements of motorway
The above illustration is an example of a joint operation because Formatted: Indent: Left: 0.94", First line: 0.25"
Corporations A and B have retained control of the assets they use to perform
the contract requirements and are responsible for their respective liabilities.
They meet their respective contractual obligations by providing construction
services to the LGU. Corporations A and B recognize in their financial
statements their own PPE and operating assets. They also recognize the income
and expenses associated with providing construction services to the LGU.
Sec. 8. Financial Statements of Parties to aa Joint Venturer. A joint venturer, a

party to a joint venture that has joint control of that joint venture, shall recognize its interest
in a joint venture as an investment and shall account for that investment using the equity
method in accordance with PPSAS 36, Investment in Associates and Joint Ventures, unless
the entity is exempted from applying the equity method as specified in that Standard.
Detailed discussion of the equity method is contained in Chapter 16-Investments in
Associates and Joint Ventures 6 of this Manual.
Sec. 9. Formatted: Indent: Left: 0", First line: 0.5", Numbered
+ Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 +
Sec. 9.Sec. 10. Disclosures. The required disclosures relating to joint arrangements Alignment: Left + Aligned at: 1.75" + Tab after: 2" +
are contained in Chapter 24-– Disclosure of Interests in Other Entities. Indent at: 2", Tab stops: Not at 2"
266

Chapter 15 - Joint Arrangements 08312018 Rev 31919

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Chapter 15 - Joint Arrangements 08312018 Rev 31919

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JOINT ARRANGEMENTS Formatted: Font color: Auto

Sec. 1. Withdrawal and Replacement of PPSAS 8. PPSAS 37, Joint Arrangements,

Therefore, a Government Corporation (GC) classified as Non-Government Business

d.e. Party to a joint arrangement – is an entity that participates in a joint arrangement,

e.f. Separate Vehicle – is a separately identifiable financial structure, including

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Structure of the Joint Arrangement

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An entity shall consider:

Joint Operation Joint Venture

In such a case, the assessment of the rights and obligations conferred

However, the Corporations A and B modify the features of

Such binding modifications to the features of Corporation AB can

Do the terms of the binding

Have the parties designed the

In accordance with the agreement between Corporations A and B:

Account Title Account Code Debit Credit

Road Networks 10603010 P5,000,000

Cash in Bank-Local Currency,

Road Networks 10603010 P7,000,000

Cash in Bank-Local Currency,

Sec. 8. Financial Statements of Parties to aa Joint Venturer. A joint venturer, a

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