ifrs 11 joint arrangements

ICAN IFRS CertificationTraining Programme

Module II

25 September 2012

Abuja

2ICAN’S IFRS Certification Training – IAS 21

IFRS 11

Joint Arrangements

3

Contents1. Key definitions

3. Types of Joint Arrangement

4. Classification of joint arrangements

5. Financial statements of parties in joint arrangement

2. Core Principle

6. Disclosures

7. Applicability and early adoption

Key definitions‒ Joint arrangement is an arrangement of which two or more parties have joint

control

‒ Joint control is 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.

‒ Joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

‒ Joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

‒ Joint venturer is a party to a joint venture that has joint control of that joint venture.

‒ 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.

5

The principle in IFRS 11

IFRS 11 establishes a principle-based approach for the

accounting for joint arrangements:

Parties to a joint arrangement recognise their

rights and obligations arising from

the arrangement

5

© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

The core principle

The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. [IFRS 11:1-2]

7

JOINT CONTROL

Do all the parties, or a group of the parties, have joint

control over the arrangement?

TYPE OF

JOINT ARRANGEMENT

Analysis of the parties’ rights

and obligations arising from the arrangement

Outside the

scope of IFRS 11

No

Yes

Joint operation

Joint venture

IFRS 11: The assessments required

IFRS 11: Assessing joint control

Does the contractual arrangement

give all the parties, or a group of the parties, control of the

arrangement collectively?

Outside the

scope of IFRS 11

No

Yes

8






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 the

scope of IFRS 11

No

Yes

Yes

NoOutside the

scope of IFRS 11

9






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 is jointly controlled.

The arrangement is a joint arrangement.

Outside the

scope of IFRS 11

No

Yes

Yes

NoOutside the

scope of IFRS 11

10


Types of joint arrangements

Analysis of the parties’ rights and

obligations arising from the arrangement

Joint operation

Joint

venture

11


Joint operation

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. [IFRS 11:15]

Joint venture

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint venturers. [IFRS 11:16]

Classification of joint arrangement

The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement.

An entity determines the type of joint arrangement in which it is involved by considering the structure and form of the arrangement, the terms agreed by the parties in the contractual arrangement and other facts and circumstances. [IFRS 11:6, IFRS 11:14, IFRS 11:17]

Financial statements of parties to a joint arrangement – joint operationA joint operator recognises in relation to its interest in a joint operation: [IFRS 11:20]

•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 of 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.

A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation in accordance with the relevant IFRSs. [IFRS 11:21]

Financial statements of parties to a joint arrangement – joint venture

• A joint venturer recognises its interest in a joint venture as an investment.

• It shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures unless the entity is exempted from applying the equity method as specified in that standard. [IFRS 11:24]

http://www.iasplus.com/en/standards/standard26

Disclosure requirements• Aligned effective date for IFRS 10, IFRS The There are no disclosures specified in IFRS 11. Instead, IFRS 12 Disclosure of Interests in Other Entities outlines the disclosures required.

17


http://www.iasplus.com/en/standards/standard52

Applicability and early adoption

Aligned effective date for IFRS 10, IFRS The The effective date of IFRS 10, IFRS 11, IFRS 12

nd IFRS 12:•The IFRSs are to be applied for annual periods beginning on or after 1 January 2013.

•Earlier application is permitted. However, if an entity applies any of the IFRSs earlier, it is required to apply the other IFRSs at the same time.

18


• THANK YOU ALL [email protected]

08052090316

mailto:[email protected]

ifrs 11 joint arrangements

Education