Jointly controlled entities a jointly controlled

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Unformatted text preview: f IFRS 11 Joint Arrangements is governed by IAS 31 Interests in Joint Ventures. There are three classifications of joint venture under IAS 31: jointly controlled entity, jointly controlled asset and jointly controlled operation. Jointly controlled entities A jointly controlled entity is a joint arrangement that is carried out through a separate legal entity. Currently there is an accounting policy choice that applied when accounting for jointly controlled entities. A venturer accounts for its interest using either proportionate consolidation or the equity method. In KPMG's 2008 survey The Application of IFRS: Oil and Gas there was an almost even split between companies applying the equity method and those using proportionate consolidation. Jointly controlled assets and jointly controlled operations Jointly controlled assets and jointly controlled operations are joint ventures that are not separate legal entities. Venturers in jointly controlled assets and jointly controlled operations recognise the assets and liabilities, or share of assets and liabilities, that they control, as well as the costs incurred and income received in relation to that arrangement. definitions of each category differ from those in IAS 31. The classification of arrangements under IFRS 11 is more judgemental and the terms of arrangements and the nature of any related agreements must be considered to determine the classification of the arrangement for accounting purposes. Joint venture A joint venture is a joint arrangement in which the jointly controlling parties have rights to the net assets of the arrangement. Joint ventures include only arrangements that are structured through a separate vehicle (such as a separate company). However, not all joint arrangements that are companies will necessarily be joint ventures. The nature and terms of arrangements need to be reviewed to determine the appropriate classification of the arrangement. The legal form is only one factor to be considered. When the contractual arrangements and other facts and circumstances indicate that the joint venturers have rights to assets or obligations for liabilities of the arrangement, the arrangement will be a joint operation. One circumstance...
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