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INTERESTS IN JOINT VENTURES (lAS 31)
1. SCOPE
1.1 The Standard applies to account ing for interests in joi nt ventures and the financial reporting
of assets, liabilities, income, and expenses of the joi nt ventures in the accounts of the venturers .
1.2 It does not apply to investments in jointl y controlled entities held by venture capital organiza–
tions, mutual funds, unit trusts, and other similar entities or items that are accounted for at fair
value through profit and loss or class ified as held for trading under lAS 39.
1.3 A venturer does not have to apply proportionate consolidation or the equity method in these
circumstances:
(a) Where the interest is class ified as held for sale under IFRS 5.
(b) Where a parent is exempt from preparing consolidated financial statements by lAS 27. In
the separate financial statements prepared by the parent , the investment in the jointly con–
trolled entity may be accounted for by the cost method or under lAS 39.
(c) If
all
of the following apply:
I] The venturer is a wholly owned subsidiary or a partially owned subsidiary by anoth er
entity and its owners have been informed and do not object to the venturer not apply–
ing proportionate consolidation or the equity method.
2] The venturer's debt or equity capital is not traded on a publi c market.
3] The venturer has not filed nor is filing its financial statements with a security commis–
sion for the purpose of issuing any class of financia l instrument.
4] The ultimate or intermediate parent produces conso lidated financial statements in
accordance with International Financial Reporting Stand ards (IFRS).
2. DEFINITIONS OF KEY TERMS (in accordance with l AS 31)
Joint venture. A contractual agreeme nt between two or more parties that undertake an eco–
nomic activity that is subject to jo int control.
Joint control. The contractually agreed sharing of control over economic activi ty that ex ists
when the strategic decisions relating to the activity require unanimous consent of the partie s
involved.
Control. The power to govern the financial and operating policies so as to obtain benefits.
Venturer. A party to a joint venture who has joint control over that joi nt venture.
Investor in a joint venture. A party to a jo int venture who does not have joint control over that
venture.
3. DIFFERENT FORMS OF JOINT VENTURE
3.1 There are three different forms of joint venture set out in the lAS :
(1)
Jointly controlled operations
(2) Jointly controlled assets
(3) Jointly controlled entities
In all of these cases, there must be a contractual arrangement that establishes joi nt control.
3.2 The contractual arrangement is important; if there is no contractual arrangement to establish
the joint control, the investment s are not deemed to be joint ventures under lAS 3 1.
3.3 Contractual arrangements can be created in different ways . They can be by contract or via
discussions (minuted) between the venturers, or they may be set out in the articles of the entity.