LKAS 31

Sri Lanka Accounting StandardLKAS 31

Interests in Joint Ventures

















249
LKAS 31
CONTENTS
paragraphs

SRI LANKA ACCOUNTING STANDARDLKAS 31
INTERESTS IN JOINT VENTURES
SCOPE 12
DEINITIONS 312
or!" o# $oint %&ntur& '
(oint contro) *
Contractua) arrang&!&nt +12
(OINTL, CONTROLLED OPERATIONS 131'
(OINTL, CONTROLLED ASSETS 1*23
(OINTL, CONTROLLED ENTITIES 2--'
inancia) "tat&!&nt" o# a %&ntur&r 3.-/0
Proportionate consolidation 3037
Equity method 3841
Exceptions to proportionate consolidation and equity method 4245
S&1arat& #inancia) "tat&!&nt" o# a %&ntur&r
TRANSACTIONS 0ET2EEN A 3ENTURER AND A
-4-'
(OINT 3ENTURE
REPORTING INTERESTS IN (OINT 3ENTURES IN
-*/.
T5E INANCIAL STATE6ENTS O AN IN3ESTOR /1
OPERATORS O (OINT 3ENTURES /2/3
DISCLOSURE /-/'
EECTI3E DATE AND TRANSITION /*
Sri Lanka Accounting StandardLKAS 31 Interests
in Joint Ventures

!ri "an#a $ccountin% !tandard "&$! 31 Interests in Joint Ventures is set out in
para%raphs 158' $ll the para%raphs ha(e equal authority' "&$! 31 should )e
read in the context o* the Preface to Sri Lanka Accounting Standards and the
250

LKAS 31
Framework *or the Preparation and Presentation of Financial Statements.
"&$! 8 Accounting Policies, Changes in Accounting stimates and rrors
pro(ides a )asis *or selectin% and applyin% accountin% policies in the a)sence
o* explicit %uidance'

Sco1&

1 T7i" Standard "7a)) 8& a11)i&d in accounting #or int&r&"t" in $oint
%&ntur&" and t7& r&1orting o# $oint %&ntur& a""&t"9 )ia8i)iti&"9
inco!& and &:1&n"&" in t7& #inancia) "tat&!&nt" o# %&ntur&r" and
in%&"tor"9 r&gard)&"" o# t7& "tructur&" or #or!" und&r ;7ic7 t7&
$oint %&ntur& acti%iti&" tak& 1)ac&< 5o;&%&r9 it do&" not a11)= to
%&ntur&r"> int&r&"t" in $oint)= contro))&d &ntiti&" 7&)d 8=?

@aA %&ntur& ca1ita) organi"ation"9 or

@8A !utua) #und"9 unit tru"t" and "i!i)ar &ntiti&" inc)uding
in%&"t!&ntB)ink&d in"uranc& #und"

t7at u1on initia) r&cognition ar& d&"ignat&d a" at #air %a)u& t7roug7
1ro#it or )o"" or ar& c)a""i#i&d a" 7&)d #or trading and account&d #or
in accordanc& ;it7 LKAS 3+ Financial Instruments: Recognition
and Measurement. Suc7 in%&"t!&nt" "7a)) 8& !&a"ur&d at #air
%a)u& in accordanc& ;it7 LKAS 3+9 ;it7 c7ang&" in #air %a)u&
r&cogni"&d in 1ro#it or )o"" in t7& 1&riod o# t7& c7ang&< A %&ntur&r
7o)ding "uc7 an int&r&"t "7a)) !ak& t7& di"c)o"ur&" r&Cuir&d 8=
1aragra17" // and /4<

2 A %&ntur&r ;it7 an int&r&"t in a $oint)= contro))&d &ntit= i"
&:&!1t&d #ro! 1aragra17" 3. @1ro1ortionat& con"o)idationA and
3* @&Cuit= !&t7odA ;7&n it !&&t" t7& #o))o;ing condition"?

@aA t7& int&r&"t i" c)a""i#i&d a" 7&)d #or "a)& in accordanc&
;it7 SLRS / Non-current Assets eld !or Sale and
"iscontinued O#erations$

@8A t7& &:c&1tion in 1aragra17 1. o# LKAS 2' %onsolidated and
Se#arate Financial Statements a))o;ing a 1ar&nt t7at a)"o 7a"
an int&r&"t in a $oint)= contro))&d &ntit= not to 1r&"&nt
con"o)idat&d #inancia) "tat&!&nt" i" a11)ica8)&D or

251
LKAS 31
@cA a)) o# t7& #o))o;ing a11)=?

@iA t7& %&ntur&r i" a ;7o))=Bo;n&d "u8"idiar=9 or i" a
1artia))=Bo;n&d "u8"idiar= o# anot7&r &ntit= and it"
o;n&r"9 inc)uding t7o"& not ot7&r;i"& &ntit)&d to
%ot&9 7a%& 8&&n in#or!&d a8out9 and do not o8$&ct
to9 t7& %&ntur&r not a11)=ing 1ro1ortionat&
con"o)idation or t7& &Cuit= !&t7odD

@iiA t7& %&ntur&r>" d&8t or &Cuit= in"tru!&nt" ar& not trad&d
in a 1u8)ic !ark&t @a do!&"tic or #or&ign "tock &:c7ang&
or an o%&rBt7&Bcount&r !ark&t9 inc)uding )oca) and
r&giona) !ark&t"AD

@iiiA t7& %&ntur&r did not #i)&9 nor i" it in t7& 1roc&"" o# #i)ing9
it" #inancia) "tat&!&nt" ;it7 a "&curiti&" co!!i""ion or
ot7&r r&gu)ator= organi"ation9 #or t7& 1ur1o"& o# i""uing
an= c)a"" o# in"tru!&nt" in a 1u8)ic !ark&tD and

@i%A t7& u)ti!at& or an= int&r!&diat& 1ar&nt o# t7&
%&ntur&r 1roduc&" con"o)idat&d #inancia) "tat&!&nt"
a%ai)a8)& #or 1u8)ic u"& t7at co!1)= ;it7 Sri Lanka
Accounting Standard"<

D&#inition"

3 T7& #o))o;ing t&r!" ar& u"&d in t7i" Standard ;it7 t7& !&aning"
"1&ci#i&d?

%ontrol i" t7& 1o;&r to go%&rn t7& #inancia) and o1&rating 1o)ici&"
o# an &cono!ic acti%it= "o a" to o8tain 8&n&#it" #ro! it<

T7& e&uit' met(od i" a !&t7od o# accounting ;7&r&8= an int&r&"t
in a $oint)= contro))&d &ntit= i" initia))= r&cord&d at co"t and
ad$u"t&d t7&r&a#t&r #or t7& 1o"tBacCui"ition c7ang& in t7&
%&ntur&r>" "7ar& o# n&t a""&t" o# t7& $oint)= contro))&d &ntit=< T7&
1ro#it or )o"" o# t7& %&ntur&r inc)ud&" t7& %&ntur&r>" "7ar& o# t7&
1ro#it or )o"" o# t7& $oint)= contro))&d &ntit=<

252

LKAS 31
An in)estor in a *oint )enture i" a 1art= to a $oint %&ntur& and do&"
not 7a%& $oint contro) o%&r t7at $oint %&ntur&<

Joint control i" t7& contractua))= agr&&d "7aring o# contro) o%&r
an &cono!ic acti%it=9 and &:i"t" on)= ;7&n t7& "trat&gic #inancia)
and o1&rating d&ci"ion" r&)ating to t7& acti%it= r&Cuir& t7&
unani!ou" con"&nt o# t7& 1arti&" "7aring contro) @t7& %&ntur&r"A<

A *oint )enture i" a contractua) arrang&!&nt ;7&r&8= t;o or
!or& 1arti&" und&rtak& an &cono!ic acti%it= t7at i" "u8$&ct to $oint
contro)<

+ro#ortionate consolidation i" a !&t7od o# accounting ;7&r&8= a
%&ntur&r>" "7ar& o# &ac7 o# t7& a""&t"9 )ia8i)iti&"9 inco!& and
&:1&n"&" o# a $oint)= contro))&d &ntit= i" co!8in&d )in& 8= )in& ;it7
"i!i)ar it&!" in t7& %&ntur&r>" #inancia) "tat&!&nt" or r&1ort&d a"
"&1arat& )in& it&!" in t7& %&ntur&r>" #inancia) "tat&!&nt"<

Se#arate !inancial statements ar& t7o"& 1r&"&nt&d 8= a 1ar&nt9
an in%&"tor in an a""ociat& or a %&ntur&r in a $oint)= contro))&d
&ntit=9 in ;7ic7 t7& in%&"t!&nt" ar& account&d #or on t7& 8a"i" o# t7&
dir&ct &Cuit= int&r&"t rat7&r t7an on t7& 8a"i" o# t7& r&1ort&d r&"u)t"
and n&t a""&t" o# t7& in%&"t&&"<

Signi!icant in!luence i" t7& 1o;&r to 1artici1at& in t7& #inancia)
and o1&rating 1o)ic= d&ci"ion" o# an &cono!ic acti%it= 8ut i" not
contro) or $oint contro) o%&r t7o"& 1o)ici&"<

A )enturer i" a 1art= to a $oint %&ntur& and 7a" $oint contro) o%&r
t7at $oint %&ntur&<

4 +inancial statements in ,hich proportionate consolidation or the equity
method is applied are not separate *inancial statements- nor are the
*inancial statements o* an entity that does not ha(e a su)sidiary-
associate or (enturer.s interest in a /ointly controlled entity'

5 !eparate *inancial statements are those presented in addition to
consolidated *inancial statements- *inancial statements in ,hich
in(estments are accounted *or usin% the equity method and *inancial
statements in ,hich (enturers. interests in /oint (entures are
proportionately consolidated' !eparate *inancial statements need not )e
appended to- or accompany- those statements'
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LKAS 31
0 Entities that are exempted in accordance ,ith para%raph 10 o*
"&$! 27 *rom consolidation- para%raph 131c2 o* "&$! 28 In!estments
in Associates *rom applyin% the equity method or para%raph 2 o* this
!tandard *rom applyin% proportionate consolidation or the equity
method may present separate *inancial statements as their only *inancial
statements'

or!" o# $oint %&ntur&

7 3oint (entures ta#e many di**erent *orms and structures' 4his !tandard
identi*ies three )road types5/ointly controlled operations- /ointly
controlled assets and /ointly controlled entities5that are commonly
descri)ed as- and meet the de*inition o*- /oint (entures' 4he *ollo,in%
characteristics are common to all /oint (entures6

1a2 t,o or more (enturers are )ound )y a contractual arran%ement7
and

1)2 the contractual arran%ement esta)lishes /oint control'

(oint contro)

8 3oint control may )e precluded ,hen an in(estee is in le%al
reor%anisation or in )an#ruptcy- or operates under se(ere lon%8term
restrictions on its a)ility to trans*er *unds to the (enturer' 9* /oint
control is continuin%- these e(ents are not enou%h in themsel(es to
/usti*y not accountin% *or /oint (entures in accordance ,ith this
!tandard'

Contractua) arrang&!&nt

9 4he existence o* a contractual arran%ement distin%uishes interests that
in(ol(e /oint control *rom in(estments in associates in ,hich the
in(estor has si%ni*icant in*luence 1see "&$! 282' $cti(ities that ha(e
no contractual arran%ement to esta)lish /oint control are not /oint
(entures *or the purposes o* this !tandard'

10 4he contractual arran%ement may )e e(idenced in a num)er o* ,ays-
*or example )y a contract )et,een the (enturers or minutes o*
discussions )et,een the (enturers' 9n some cases- the arran%ement is
incorporated in the articles or other )y8la,s o* the /oint (enture'
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LKAS 31
:hate(er its *orm- the contractual arran%ement is usually in ,ritin% and
deals ,ith such matters as6
1a2 the acti(ity- duration and reportin% o)li%ations o* the /oint
(enture7

1)2 the appointment o* the )oard o* directors or equi(alent %o(ernin%
)ody o* the /oint (enture and the (otin% ri%hts o* the (enturers7

1c2 capital contri)utions )y the (enturers7 and

1d2 the sharin% )y the (enturers o* the output- income- expenses or
results o* the /oint (enture'

11 4he contractual arran%ement esta)lishes /oint control o(er the /oint
(enture' !uch a requirement ensures that no sin%le (enturer is in a
position to control the acti(ity unilaterally'

12 4he contractual arran%ement may identi*y one (enturer as the
operator or mana%er o* the /oint (enture' 4he operator does not control
the /oint (enture )ut acts ,ithin the *inancial and operatin% policies
that ha(e )een a%reed )y the (enturers in accordance ,ith the
contractual arran%ement and dele%ated to the operator' 9* the operator
has the po,er to %o(ern the *inancial and operatin% policies o* the
economic acti(ity- it controls the (enture and the (enture is a
su)sidiary o* the operator and not a /oint (enture'

(oint)= contro))&d o1&ration"

13 4he operation o* some /oint (entures in(ol(es the use o* the assets
and other resources o* the (enturers rather than the esta)lishment
o* a corporation- partnership or other entity- or a *inancial structure
that is separate *rom the (enturers themsel(es' Each (enturer uses its
o,n property- plant and equipment and carries its o,n in(entories' 9t
also incurs its o,n expenses and lia)ilities and raises its o,n *inance-
,hich represent its o,n o)li%ations' 4he /oint (enture acti(ities may )e
carried out )y the (enturer.s employees alon%side the (enturer.s similar
acti(ities' 4he /oint (enture a%reement usually pro(ides a means )y
,hich the re(enue *rom the sale o* the /oint product and any
expenses incurred in common are shared amon% the (enturers'

255
LKAS 31
14 $n example o* a /ointly controlled operation is ,hen t,o or
more (enturers com)ine their operations- resources and expertise to
manu*acture- mar#et and distri)ute /ointly a particular product- such as
an aircra*t' ;i**erent parts o* the manu*acturin% process are carried out
)y each o* the (enturers' Each (enturer )ears its o,n costs and ta#es a
share o* the re(enue *rom the sale o* the aircra*t- such share )ein%
determined in accordance ,ith the contractual arran%ement'

1/ In r&"1&ct o# it" int&r&"t" in $oint)= contro))&d o1&ration"9 a
%&ntur&r "7a)) r&cogni"& in it" #inancia) "tat&!&nt"?

@aA t7& a""&t" t7at it contro)" and t7& )ia8i)iti&" t7at it incur"D and

@8A t7& &:1&n"&" t7at it incur" and it" "7ar& o# t7& inco!& t7at it
&arn" #ro! t7& "a)& o# good" or "&r%ic&" 8= t7& $oint %&ntur&<

10 ecause the assets- lia)ilities- income and expenses are reco%nised in
the *inancial statements o* the (enturer- no ad/ustments or other
consolidation procedures are required in respect o* these items ,hen
the (enturer presents consolidated *inancial statements'

17 !eparate accountin% records may not )e required *or the /oint (enture
itsel* and *inancial statements may not )e prepared *or the /oint (enture'
<o,e(er- the (enturers may prepare mana%ement accounts so that
they may assess the per*ormance o* the /oint (enture'

(oint)= contro))&d a""&t"

18 !ome /oint (entures in(ol(e the /oint control- and o*ten the /oint
o,nership- )y the (enturers o* one or more assets contri)uted to- or
acquired *or the purpose o*- the /oint (enture and dedicated to the
purposes o* the /oint (enture' 4he assets are used to o)tain )ene*its *or
the (enturers' Each (enturer may ta#e a share o* the output *rom the
assets and each )ears an a%reed share o* the expenses incurred'

19 4hese /oint (entures do not in(ol(e the esta)lishment o* a corporation-
partnership or other entity- or a *inancial structure that is separate
*rom the (enturers themsel(es' Each (enturer has control o(er its share
o* *uture economic )ene*its throu%h its share o* the /ointly controlled
asset'

250

LKAS 31
20 =any acti(ities in the oil- %as and mineral extraction industries in(ol(e
/ointly controlled assets' +or example- a num)er o* oil production
companies may /ointly control and operate an oil pipeline' Each
(enturer uses the pipeline to transport its o,n product in return *or
,hich it )ears an a%reed proportion o* the expenses o* operatin% the
pipeline' $nother example o* a /ointly controlled asset is ,hen t,o
entities /ointly control a property- each ta#in% a share o* the rents
recei(ed and )earin% a share o* the expenses'

21 In r&"1&ct o# it" int&r&"t in $oint)= contro))&d a""&t"9 a %&ntur&r "7a))
r&cogni"& in it" #inancia) "tat&!&nt"?

@aA it" "7ar& o# t7& $oint)= contro))&d a""&t"9 c)a""i#i&d according to
t7& natur& o# t7& a""&t"D

@8A an= )ia8i)iti&" t7at it 7a" incurr&dD

@cA it" "7ar& o# an= )ia8i)iti&" incurr&d $oint)= ;it7 t7& ot7&r
%&ntur&r" in r&)ation to t7& $oint %&ntur&D

@dA an= inco!& #ro! t7& "a)& or u"& o# it" "7ar& o# t7&
out1ut o# t7& $oint %&ntur&9 tog&t7&r ;it7 it" "7ar& o# an=
&:1&n"&" incurr&d 8= t7& $oint %&ntur&D and

@&A an= &:1&n"&" t7at it 7a" incurr&d in r&"1&ct o# it" int&r&"t
in t7& $oint %&ntur&<

22 9n respect o* its interest in /ointly controlled assets- each (enturer
includes in its accountin% records and reco%nises in its *inancial
statements6

1a2 its share o* the /ointly controlled assets- classi*ied accordin% to
the nature o* the assets rather than as an in(estment' +or
example- a share o* a /ointly controlled oil pipeline is classi*ied as
property- plant and equipment'

1)2 any lia)ilities that it has incurred- *or example those incurred in
*inancin% its share o* the assets'

1c2 its share o* any lia)ilities incurred /ointly ,ith other (enturers in
relation to the /oint (enture'

257
LKAS 31
1d2 any income *rom the sale or use o* its share o* the output
o* the /oint (enture- to%ether ,ith its share o* any expenses
incurred )y the /oint (enture'

1e2 any expenses that it has incurred in respect o* its interest in
the /oint (enture- *or example those related to *inancin% the
(enturer.s interest in the assets and sellin% its share o* the output'

ecause the assets- lia)ilities- income and expenses are reco%nised in
the *inancial statements o* the (enturer- no ad/ustments or other
consolidation procedures are required in respect o* these items ,hen
the (enturer presents consolidated *inancial statements'

23 4he treatment o* /ointly controlled assets re*lects the su)stance and
economic reality and- usually- the le%al *orm o* the /oint (enture'
!eparate accountin% records *or the /oint (enture itsel* may )e limited
to those expenses incurred in common )y the (enturers and ultimately
)orne )y the (enturers accordin% to their a%reed shares' +inancial
statements may not )e prepared *or the /oint (enture- althou%h the
(enturers may prepare mana%ement accounts so that they may assess
the per*ormance o* the /oint (enture'

(oint)= contro))&d &ntiti&"

24 $ /ointly controlled entity is a /oint (enture that in(ol(es the
esta)lishment o* a corporation- partnership or other entity in ,hich each
(enturer has an interest' 4he entity operates in the same ,ay as other
entities- except that a contractual arran%ement )et,een the (enturers
esta)lishes /oint control o(er the economic acti(ity o* the entity'

25 $ /ointly controlled entity controls the assets o* the /oint (enture-
incurs lia)ilities and expenses and earns income' 9t may enter into
contracts in its o,n name and raise *inance *or the purposes o* the
/oint (enture acti(ity' Each (enturer is entitled to a share o* the
pro*its o* the /ointly controlled entity- althou%h some /ointly controlled
entities also in(ol(e a sharin% o* the output o* the /oint (enture'

20 $ common example o* a /ointly controlled entity is ,hen t,o entities
com)ine their acti(ities in a particular line o* )usiness )y trans*errin%
the rele(ant assets and lia)ilities into a /ointly controlled entity'
$nother example is ,hen an entity commences a )usiness in a *orei%n
258

LKAS 31
country in con/unction ,ith the %o(ernment or other a%ency in that
country- )y esta)lishin% a separate entity that is /ointly controlled )y the
entity and the %o(ernment or a%ency'

27 =any /ointly controlled entities are similar in su)stance to those /oint
(entures re*erred to as /ointly controlled operations or /ointly
controlled assets' +or example- the (enturers may trans*er a /ointly
controlled asset- such as an oil pipeline- into a /ointly controlled entity-
*or tax or other reasons' !imilarly- the (enturers may contri)ute into
a /ointly controlled entity assets that ,ill )e operated /ointly'
!ome /ointly controlled operations also in(ol(e the esta)lishment o* a
/ointly controlled entity to deal ,ith particular aspects o* the acti(ity-
*or example- the desi%n- mar#etin%- distri)ution or a*ter8sales ser(ice o*
the product'

28 $ /ointly controlled entity maintains its o,n accountin% records
and prepares and presents *inancial statements in the same ,ay as other
entities in con*ormity ,ith !ri "an#a $ccountin% !tandards'

29 Each (enturer usually contri)utes cash or other resources to the /ointly
controlled entity' 4hese contri)utions are included in the accountin%
records o* the (enturer and reco%nised in its *inancial statements as
an in(estment in the /ointly controlled entity'

inancia) "tat&!&nt" o# a %&ntur&r

Pro1ortionat& con"o)idation

3. A %&ntur&r "7a)) r&cogni"& it" int&r&"t in a $oint)= contro))&d &ntit=
u"ing 1ro1ortionat& con"o)idation or t7& a)t&rnati%& !&t7od
d&"cri8&d in 1aragra17 3*< 27&n 1ro1ortionat& con"o)idation i"
u"&d9 on& o# t7& t;o r&1orting #or!at" id&nti#i&d 8&)o; "7a)) 8&
u"&d<

31 $ (enturer reco%nises its interest in a /ointly controlled entity usin% one
o* the t,o reportin% *ormats *or proportionate consolidation irrespecti(e
o* ,hether it also has in(estments in su)sidiaries or ,hether it
descri)es its *inancial statements as consolidated *inancial statements'

32 :hen reco%nisin% an interest in a /ointly controlled entity- it is essential
that a (enturer re*lects the su)stance and economic reality o* the
arran%ement- rather than the /oint (enture.s particular structure or *orm'
259
LKAS 31
9n a /ointly controlled entity- a (enturer has control o(er its share o*
*uture economic )ene*its throu%h its share o* the assets and lia)ilities o*
the (enture' 4his su)stance and economic reality are re*lected in the
consolidated *inancial statements o* the (enturer ,hen the (enturer
reco%nises its interests in the assets- lia)ilities- income and expenses o*
the /ointly controlled entity )y usin% one o* the t,o reportin% *ormats
*or proportionate consolidation descri)ed in para%raph 34'

33 4he application o* proportionate consolidation means that the statement
o* *inancial position o* the (enturer includes its share o* the assets that
it controls /ointly and its share o* the lia)ilities *or ,hich it is
/ointly responsi)le' 4he statement o* comprehensi(e income o* the
(enturer includes its share o* the income and expenses o* the /ointly
controlled entity' =any o* the procedures appropriate *or the application
o* proportionate consolidation are similar to the procedures *or the
consolidation o* in(estments in su)sidiaries- ,hich are set out in "&$!
27'

34 ;i**erent reportin% *ormats may )e used to %i(e e**ect to
proportionate consolidation' 4he (enturer may com)ine its share o*
each o* the assets- lia)ilities- income and expenses o* the /ointly
controlled entity ,ith the similar items- line )y line- in its *inancial
statements' +or example- it may com)ine its share o* the /ointly
controlled entity.s in(entory ,ith its in(entory and its share o* the
/ointly controlled entity.s property- plant and equipment ,ith its
property- plant and equipment' $lternati(ely- the (enturer may include
separate line items *or its share o* the assets- lia)ilities- income and
expenses o* the /ointly controlled entity in its *inancial statements' +or
example- it may sho, its share o* a current asset o* the /ointly
controlled entity separately as part o* its current assets7 it may sho,
its share o* the property- plant and equipment o* the /ointly
controlled entity separately as part o* its property- plant and equipment'
oth these reportin% *ormats result in the reportin% o* identical amounts
o* pro*it or loss and o* each ma/or classi*ication o* assets- lia)ilities-
income and expenses7 )oth *ormats are accepta)le *or the purposes o*
this !tandard'

35 :hiche(er *ormat is used to %i(e e**ect to proportionate consolidation-
it is inappropriate to o**set any assets or lia)ilities )y the deduction o*
other lia)ilities or assets or any income or expenses )y the deduction o*
other expenses or income- unless a le%al ri%ht o* set8o** exists and the
o**settin% represents the expectation as to the realisation o* the asset or
the settlement o* the lia)ility'
200

LKAS 31

34 A %&ntur&r "7a)) di"continu& t7& u"& o# 1ro1ortionat& con"o)idation #ro!
t7& dat& on ;7ic7 it c&a"&" to 7a%& $oint contro) o%&r a $oint)=
contro))&d &ntit=<

37 $ (enturer discontinues the use o* proportionate consolidation *rom the date
on ,hich it ceases to share in the control o* a /ointly controlled entity'
4his may happen- *or example- ,hen the (enturer disposes o* its
interest or ,hen such external restrictions are placed on the /ointly
controlled entity that the (enturer no lon%er has /oint control'




ECuit= !&t7od

3* A" an a)t&rnati%& to 1ro1ortionat& con"o)idation d&"cri8&d in
1aragra17 3.9 a %&ntur&r "7a)) r&cogni"& it" int&r&"t in a
$oint)= contro))&d &ntit= u"ing t7& &Cuit= !&t7od<

39 $ (enturer reco%nises its interest in a /ointly controlled entity usin% the
equity method irrespecti(e o* ,hether it also has in(estments in
su)sidiaries or ,hether it descri)es its *inancial statements as
consolidated *inancial statements'

40 !ome (enturers reco%nise their interests in /ointly controlled entities
usin% the equity method- as descri)ed in "&$! 28' 4he use o* the
equity method is supported )y those ,ho ar%ue that it is inappropriate
to com)ine controlled items ,ith /ointly controlled items and )y
those ,ho )elie(e that (enturers ha(e si%ni*icant in*luence- rather than
/oint control- in a /ointly controlled entity' 4his !tandard does not
recommend the use o* the equity method )ecause proportionate
consolidation )etter re*lects the su)stance and economic reality o* a
(enturer.s interest in a /ointly controlled entity- that is to say- control
o(er the (enturer.s share o* the *uture economic )ene*its' >e(ertheless-
this !tandard permits the use o* the equity method- as an alternati(e
treatment- ,hen reco%nisin% interests in /ointly controlled entities'

-1 A %&ntur&r "7a)) di"continu& t7& u"& o# t7& &Cuit= !&t7od #ro! t7& dat&
on ;7ic7 it c&a"&" to 7a%& $oint contro) o%&r9 or 7a%&
"igni#icant in#)u&nc& in9 a $oint)= contro))&d &ntit=<

201
LKAS 31
E:c&1tion" to 1ro1ortionat& con"o)idation and &Cuit= !&t7od

-2 Int&r&"t" in $oint)= contro))&d &ntiti&" t7at ar& c)a""i#i&d a" 7&)d #or
"a)& in accordanc& ;it7 SLRS / "7a)) 8& account&d #or in
accordanc& ;it7 t7at SLRS<

43 :hen an interest in a /ointly controlled entity pre(iously classi*ied as
held *or sale no lon%er meets the criteria to )e so classi*ied- it shall )e
accounted *or usin% proportionate consolidation or the equity method
as *rom the date o* its classi*ication as held *or sale' +inancial
statements *or the periods since classi*ication as held *or sale shall )e
amended accordin%ly'

44 ?;eleted@

-/ 27&n an in%&"tor c&a"&" to 7a%& $oint contro) o%&r an &ntit=9 it "7a))
account #or an= r&!aining in%&"t!&nt in accordanc& ;it7 LKAS 3+
#ro! t7at dat&9 1ro%id&d t7at t7& #or!&r $oint)= contro))&d &ntit=
do&" not 8&co!& a "u8"idiar= or a""ociat&< ro! t7& dat& ;7&n a
$oint)= contro))&d &ntit= 8&co!&" a "u8"idiar= o# an in%&"tor9 t7&
in%&"tor "7a)) account #or it" int&r&"t in accordanc& ;it7 LKAS 2'
and SLRS 3 ,usiness %om-inations< ro! t7& dat& ;7&n a $oint)=
contro))&d &ntit= 8&co!&" an a""ociat& o# an in%&"tor9 t7& in%&"tor
"7a)) account #or it" int&r&"t in accordanc& ;it7 LKAS 2*< On t7&
)o"" o# $oint contro)9 t7& in%&"tor "7a)) !&a"ur& at #air %a)u& an=
in%&"t!&nt t7& in%&"tor r&tain" in t7& #or!&r $oint)= contro))&d
&ntit=< T7& in%&"tor "7a)) r&cogni"& in 1ro#it or )o"" an=
di##&r&nc& 8&t;&&n?

@aA t7& #air %a)u& o# an= r&tain&d in%&"t!&nt and an= 1roc&&d"
#ro! di"1o"ing o# t7& 1art int&r&"t in t7& $oint)= contro))&d
&ntit=D and

@8A t7& carr=ing a!ount o# t7& in%&"t!&nt at t7& dat& ;7&n
$oint contro) i" )o"t<

-/A 27&n an in%&"t!&nt c&a"&" to 8& a $oint)= contro))&d &ntit= and i"
account&d #or in accordanc& ;it7 LKAS 3+9 t7& #air %a)u& o# t7&
in%&"t!&nt ;7&n it c&a"&" to 8& a $oint)= contro))&d &ntit= "7a)) 8&
r&gard&d a" it" #air %a)u& on initia) r&cognition a" a #inancia) a""&t in
accordanc& ;it7 LKAS 3+<

202

LKAS 31
45 9* an in(estor loses /oint control o* an entity- the in(estor shall account
*or all amounts reco%nised in other comprehensi(e income in relation to
that entity on the same )asis as ,ould )e required i* the /ointly controlled
entity had directly disposed o* the related assets or lia)ilities' 4here*ore-
i* a %ain or loss pre(iously reco%nised in other comprehensi(e income
,ould )e reclassi*ied to pro*it or loss on the disposal o* the related assets
or lia)ilities- the in(estor reclassi*ies the %ain or loss *rom equity to pro*it
or loss 1as a reclassi*ication ad/ustment2 ,hen the in(estor loses /oint
control o* the entity' +or example- i* a /ointly controlled entity has
a(aila)le8*or8sale *inancial assets and the in(estor loses /oint control o*
the entity- the in(estor shall reclassi*y to pro*it or loss the %ain or
loss pre(iously reco%nised in other comprehensi(e income in relation
to those assets' 9* an in(estor.s o,nership interest in a /ointly
controlled entity is reduced- )ut the in(estment continues to )e a
/ointly controlled entity- the in(estor shall reclassi*y to pro*it or loss
only a proportionate amount o* the %ain or loss pre(iously
reco%nised in other comprehensi(e income'
S&1arat& #inancia) "tat&!&nt" o# a %&ntur&r

-4 An int&r&"t in a $oint)= contro))&d &ntit= "7a)) 8& account&d #or in a
%&ntur&r>" "&1arat& #inancia) "tat&!&nt" in accordanc& ;it7
1aragra17" 3*-3 o# LKAS 2'<

47 4his !tandard does not mandate ,hich entities produce separate *inancial
statements a(aila)le *or pu)lic use'

Tran"action" 8&t;&&n a %&ntur&r and a $oint
%&ntur&

203
LKAS 31
-* 27&n a %&ntur&r contri8ut&" or "&))" a""&t" to a $oint %&ntur&9
r&cognition o# an= 1ortion o# a gain or )o"" #ro! t7& tran"action
"7a)) r&#)&ct t7& "u8"tanc& o# t7& tran"action< 27i)& t7& a""&t" ar&
r&tain&d 8= t7& $oint %&ntur&9 and 1ro%id&d t7& %&ntur&r 7a"
tran"#&rr&d t7& "igni#icant ri"k" and r&;ard" o# o;n&r"7i19 t7&
%&ntur&r "7a)) r&cogni"& on)= t7at 1ortion o# t7& gain or )o"" t7at i"
attri8uta8)& to t7& int&r&"t" o# t7& ot7&r %&ntur&r"<
1
T7& %&ntur&r
"7a)) r&cogni"& t7& #u)) a!ount o# an= )o"" ;7&n t7& contri8ution or
"a)& 1ro%id&" &%id&nc& o# a r&duction in t7& n&t r&a)i"a8)& %a)u& o#
curr&nt a""&t" or an i!1air!&nt )o""<

-+ 27&n a %&ntur&r 1urc7a"&" a""&t" #ro! a $oint %&ntur&9 t7&
%&ntur&r "7a)) not r&cogni"& it" "7ar& o# t7& 1ro#it" o# t7& $oint
%&ntur& #ro! t7& tran"action unti) it r&"&))" t7& a""&t" to an
ind&1&nd&nt 1art=< A %&ntur&r "7a)) r&cogni"& it" "7ar& o# t7& )o""&"
r&"u)ting #ro! t7&"& tran"action" in t7& "a!& ;a= a" 1ro#it" &:c&1t
t7at )o""&" "7a)) 8& r&cogni"&d i!!&diat&)= ;7&n t7&= r&1r&"&nt a
r&duction in t7& n&t r&a)i"a8)& %a)u& o# curr&nt a""&t" or an
i!1air!&nt )o""<

50 4o assess ,hether a transaction )et,een a (enturer and a /oint (enture
pro(ides e(idence o* impairment o* an asset- the (enturer determines
the reco(era)le amount o* the asset in accordance ,ith "&$! 30
Impairment of Assets' 9n determinin% (alue in use- the (enturer
estimates *uture cash *lo,s *rom the asset on the )asis o* continuin% use
o* the asset and its ultimate disposal )y the /oint (enture'

R&1orting int&r&"t" in $oint %&ntur&" in t7& #inancia)
"tat&!&nt" o# an in%&"tor

/1 An in%&"tor in a $oint %&ntur& t7at do&" not 7a%& $oint contro) "7a))
account #or t7at in%&"t!&nt in accordanc& ;it7 LKAS 3+ or9 i# it
7a" "igni#icant in#)u&nc& in t7& $oint %&ntur&9 in accordanc& ;it7
LKAS 2*<

O1&rator" o# $oint %&ntur&"
1 !ee also !9A813 Jointl" Controlled ntities # $on%&onetar" Contri'utions '"
Venturers.
204

LKAS 31

/2 O1&rator" or !anag&r" o# a $oint %&ntur& "7a)) account #or an= #&&" in
accordanc& ;it7 LKAS 1* Re)enue<

53 Bne or more (enturers may act as the operator or mana%er o* a /oint (enture'
Bperators are usually paid a mana%ement *ee *or such duties' 4he *ees
are accounted *or )y the /oint (enture as an expense'

Di"c)o"ur&

/- A %&ntur&r "7a)) di"c)o"& t7& aggr&gat& a!ount o# t7& #o))o;ing
conting&nt )ia8i)iti&"9 un)&"" t7& 1ro8a8i)it= o# )o"" i" r&!ot&9
"&1arat&)= #ro! t7& a!ount o# ot7&r conting&nt )ia8i)iti&"?

@aA an= conting&nt )ia8i)iti&" t7at t7& %&ntur&r 7a" incurr&d in
r&)ation to it" int&r&"t" in $oint %&ntur&" and it" "7ar& in &ac7
o# t7& conting&nt )ia8i)iti&" t7at 7a%& 8&&n incurr&d $oint)=
;it7 ot7&r %&ntur&r"D

@8A it" "7ar& o# t7& conting&nt )ia8i)iti&" o# t7& $oint %&ntur&"
t7&!"&)%&" #or ;7ic7 it i" conting&nt)= )ia8)&D and

@cA t7o"& conting&nt )ia8i)iti&" t7at ari"& 8&cau"& t7& %&ntur&r i"
conting&nt)= )ia8)& #or t7& )ia8i)iti&" o# t7& ot7&r %&ntur&r" o# a
$oint %&ntur&<

// A %&ntur&r "7a)) di"c)o"& t7& aggr&gat& a!ount o# t7& #o))o;ing
co!!it!&nt" in r&"1&ct o# it" int&r&"t" in $oint %&ntur&" "&1arat&)=
#ro! ot7&r co!!it!&nt"?

@aA an= ca1ita) co!!it!&nt" o# t7& %&ntur&r in r&)ation to it"
int&r&"t" in $oint %&ntur&" and it" "7ar& in t7& ca1ita)
co!!it!&nt" t7at 7a%& 8&&n incurr&d $oint)= ;it7 ot7&r
%&ntur&r"D and

@8A it" "7ar& o# t7& ca1ita) co!!it!&nt" o# t7& $oint %&ntur&"
t7&!"&)%&"<

205
LKAS 31
/4 A %&ntur&r "7a)) di"c)o"& a )i"ting and d&"cri1tion o# int&r&"t" in
"igni#icant $oint %&ntur&" and t7& 1ro1ortion o# o;n&r"7i1 int&r&"t
7&)d in $oint)= contro))&d &ntiti&"< A %&ntur&r t7at r&cogni"&" it"
int&r&"t" in $oint)= contro))&d &ntiti&" u"ing t7& )in&B8=B)in&
r&1orting #or!at #or 1ro1ortionat& con"o)idation or t7& &Cuit=
!&t7od "7a)) di"c)o"& t7& aggr&gat& a!ount" o# &ac7 o# curr&nt
a""&t"9 )ongBt&r! a""&t"9 curr&nt )ia8i)iti&"9 )ongBt&r! )ia8i)iti&"9
inco!& and &:1&n"&" r&)at&d to it" int&r&"t" in $oint %&ntur&"<

/' A %&ntur&r "7a)) di"c)o"& t7& !&t7od it u"&" to r&cogni"& it" int&r&"t" in
$oint)= contro))&d &ntiti&"<

E##&cti%& dat& and tran"ition

58 $n entity shall apply this !tandard *or annual periods )e%innin% on or
a*ter 1 3anuary 2012' Earlier application is encoura%ed' 9* an entity
applies this !tandard *or a period )e%innin% )e*ore 1 3anuary 2012- it
shall disclose that *act'

58$ ?;eleted@

58 ?;eleted@






200