IAS 31 Interest in Joint Venture

8/12/2019 IAS 31 Interest in Joint Venture

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Overview

IAS 31Interests in Joint Venturessets out the accounting for an entity's interests in variousforms of joint ventures jointly controlled o!erations" jointly controlled assets" and jointly

controlled entities# $he standard !ermits jointly controlled entities to be accounted for using

either the e%uity method or by !ro!ortionate consolidation#

IAS 31 was reissued in &ecember ((3" a!!lies to annual !eriods beginning on or after 1

)anuary ((*" and is su!erseded by I+,S 11 Joint Arrangementsand I+,S 1 Disclosure of

Interests in Other Entitieswith effect from annual !eriods beginning on or after 1 )anuary (13#

History of IAS 31

&ecember 1-.- /0!osure &raft /3*Financial Reporting of Interests in Joint Ventures

&ecember 1--( IAS 31Financial Reporting of Interests in Joint Ventures

1 )anuary 1-- /ffective date of IAS 31 1--(2

1-- IAS 31 was reformatted

&ecember 1--. IAS 31 was revised by IAS 3- effective 1 )anuary ((1

1. &ecember ((3 ,evised version of IAS 31 issued by the IAS4

1 )anuary ((* /ffective date of IAS 31 ,evised ((32

13 Se!tember ((5 /0!osure &raft /& -Joint Arrangementsissued# 6ro!oses to re!lace IAS 31with a new standard titled )oint Arrangements#

1( )anuary ((.Some significant revisions of IAS 31 were ado!ted as a result of the 4usiness

7ombinations 6hase II 6roject relating to loss of joint control

May ((.IAS 31 amended forAnnual Improvements to IFRSs 2007for certaindisclosures and reversals of im!airment losses e%uity method2

1 )anuary ((- /ffective date of the May ((. revisions to IAS 31

1 )uly ((- /ffective date of the )anuary ((. revisions to IAS 31

1 May (11IAS 31 is superseded byIFRS 11Joint Arrangementsand IFRS 12

Disclosure of Interests in Other Entitieseffective 1 January 213

Re!ated Interpretations

SI7813Jointl !ontrolle" Entities # $on%&onetar !ontri'utions ' Venturers(

Superseded by IFRS 11Joint Arrangementseffective 1 January 213

Su""ary of IAS 31
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Scope

IAS 31 a!!lies to accounting for all interests in joint ventures and the re!orting of joint venture

assets" liabilities" income" and e0!enses in the financial statements of venturers and investors"

regardless of the structures or forms under which the joint venture activities take !lace" e0ce!t

for investments held by a venture ca!ital organisation" mutual fund" unit trust" and similar entitythat by election or re%uirement2 are accounted for as under IAS 3- at fair value with fair value

changes recognised in !rofit or loss# 9IAS 31#1:

#ey definitions $IAS 31%3&

Joint venture'a contractual arrangement whereby two or more !arties undertake an economic

activity that is subject to joint control#

Venturer'a !arty to a joint venture and has joint control over that joint venture#

Investor in a (oint venture'a !arty to a joint venture and does not have joint control over thatjoint venture#

)ontro!'the !ower to govern the financial and o!erating !olicies of an activity so as to obtain

benefits from it#

Joint contro!'the contractually agreed sharing of control over an economic activity# )ointcontrol e0ists only when the strategic financial and o!erating decisions relating to the activity

re%uire the unanimous consent of the venturers#

Joint!y contro!!ed operations

)ointly controlled o!erations involve the use of assets and other resources of the venturers rather

than the establishment of a se!arate entity# /ach venturer uses its own assets" incurs its owne0!enses and liabilities" and raises its own finance# 9IAS 31#13:

IAS 31 re%uires that the venturer should recognise in its financial statements the assets that it

controls" the liabilities that it incurs" the e0!enses that it incurs" and its share of the income from

the sale of goods or services by the joint venture# 9IAS 31#1*:

Joint!y contro!!ed assets

)ointly controlled assets involve the joint control" and often the joint ownershi!" of assetsdedicated to the joint venture# /ach venturer may take a share of the out!ut from the assets andeach bears a share of the e0!enses incurred# 9IAS 31#1.:

IAS 31 re%uires that the venturer should recognise in its financial statements its share of the joint

assets" any liabilities that it has incurred directly and its share of any liabilities incurred jointly

with the other venturers" income from the sale or use of its share of the out!ut of the joint


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venture" its share of e0!enses incurred by the joint venture and e0!enses incurred directly in

res!ect of its interest in the joint venture# 9IAS 31#1:

Joint!y contro!!ed entities

A jointly controlled entity is a cor!oration" !artnershi!" or other entity in which two or moreventurers have an interest" under a contractual arrangement that establishes joint control over theentity# 9IAS 31#:

/ach venturer usually contributes cash or other resources to the jointly controlled entity# $hose

contributions are included in the accounting records of the venturer and recognised in the

venturer's financial statements as an investment in the jointly controlled entity# 9IAS 31#-:

IAS 31 allows two treatments of accounting for an investment in jointly controlled entities ;

e0ce!t as noted below

!ro!ortionate consolidation 9IAS 31#3(: e%uity method of accounting 9IAS 31#3.:

6ro!ortionate consolidation or e%uity method are not re%uired in the following e0ce!tionalcircumstances 9IAS 31#18:

An investment in a jointly controlled entity that is held by a venture ca!ital organisation

or mutual fund or similar entity2 and that u!on initial recognition is designated as held

for trading under IAS 3-#


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# the ultimate or any intermediate !arent of the venturer !roduces consolidated

financial statements available for !ublic use that com!ly with International

+inancial ,e!orting Standards#

*roportionate conso!idation

:

accounted for at cost= or

accounted for under IAS 3- +inancial Instruments ,ecognition and Measurement#

.ransactions between a venturer and a (oint venture

If a venturer contributes or sells an asset to a jointly controlled entity" while the assets areretained by the joint venture" !rovided that the venturer has transferred the risks and rewards of

ownershi!" it should recognise only the !ro!ortion of the gain attributable to the other venturers#

$he venturer should recognise the full amount of any loss incurred when the contribution or sale!rovides evidence of a reduction in the net realisable value of current assets or an im!airment

loss# 9IAS 31#.:

$he re%uirements for recognition of gains and losses a!!ly e%ually to non8monetary

contributions unless the gain or loss cannot be measured" or the other venturers contribute similarassets#


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?hen a venturer !urchases assets from a jointly controlled entity" it should not recognise its

share of the gain until it resells the asset to an inde!endent !arty# @osses should be recognised

when they re!resent a reduction in the net realisable value of current assets or an im!airmentloss# 9IAS 31#-:

Financia! state"ents of an investor

An investor in a joint venture who does not have joint control should re!ort its interest in a joint

venture in its consolidated financial statements either 9IAS 31#*1:

in accordance with IAS . Investments in Associates ; only if the investor has significant

influence in the joint venture= or

in accordance with IAS 3- +inancial Instruments ,ecognition and Measurement#

*artia! disposa!s of (oint ventures

If an investor loses joint control of a jointly controlled entity" it derecognises that investment andrecognises in !rofit or loss the difference between the sum of the !roceeds received and any

retained interest" and the carrying amount of the investment in the jointly controlled entity at the

date when joint control is lost# 9IAS 31#*:

/isc!osure

A venturer is re%uired to disclose

Information about contingent liabilities relating to its interest in a joint venture# 9IAS

31#*:

Information about commitments relating to its interests in joint ventures# 9IAS 31#**:

A listing and descri!tion of interests in significant joint ventures and the !ro!ortion of

ownershi! interest held in jointly controlled entities# A venturer that recognises its

interests in jointly controlled entities using the line8by8line re!orting format for

!ro!ortionate consolidation or the e%uity method shall disclose the aggregate amounts of

each of current assets" long8term assets" current liabilities" long8term liabilities" income"and e0!enses related to its interests in joint ventures# 9IAS 31#*>:

$he method it uses to recognise its interests in jointly controlled entities# 9IAS 31#*5:

enture ca!ital organisations or mutual funds that account for their interests in jointly controlledentities in accordance with IAS 3- must make the disclosures re%uired by IAS 31#**8*># 9IAS

31#1:

IAS 31 Interest in Joint Venture

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