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Joint Arrangements by Antonio Dayag 2 1
Joint Arrangements by Antonio Dayag 2 1
Joint Arrangements by Antonio Dayag 2 1
Dayag
Correlation of PFRS’s 9, 10, 11, 12, Second key aspect of joint control is that it exists
only when decisions about the relevant activities
PAS 28
require unanimous consent of parties that control the
arrangement collectively. (PFRS 11, part 9)
Where a joint arrangement exists there is no single
party that has control. (PFRS 11, part 10)
Party with joint control of an arrangement can
present any other parties or a group of parties from
controlling the arrangement. (PFRS 11, part 10)
There can be a joint arrangement even though not all
parties have joint control of the arrangement.
(PFRS 11, part 11)
Judgment is needed to assets whether the parties, or
a group of parties, have joint control of the
arrangement, assessment shall be made by
considering all facts and circumstances. (PFRS 11,
part 12)
If facts and circumstances change, an entity shall
reassess whether I has joint control of the
arrangement.
B5- Asset control
B6- Determine if joint control
B8- When the minimum required proportion of the
voting rights can be achieved by more than one
combination of the parties agreeing together,
that arrangement is not a joint arrangement
Principles of Investments in Joint unless stipulated by contractual arrangements
Arrangement B9- Protective rights only and not relevant activities-
Joint Arrangement ~ is an arrangement of which not a party with joint control
two or more parties have joint control (PFRS 11, B10- Arbitration of disputes does not prevent the
part 4) arrangement from being jointly controlled/joint
Arrangement is described as an ACTIVITY or an arrangement
OPERATION or a specific grouping of asset and B11- If arrangement outside PFRS 11, an entity
liabilities, which may or may not form a legal accounts for its interest in accordance with
entity. relevant PFRS such as PFRS 10, 28 or PFRS 9.
Characteristics: (PFRS 11, part 5) Voting Rights
A. Parties are bound by contractual agreement
B2- Contractual agreements can be evidenced in
several ways. An enforceable contractual
arrangement is often, but, not always in
writing. It may be a contracted or documented
discussion between the parties.
B3- When joint arrangements are structured thru a
separate vehicle, the contractual agreement or
some aspects of contractual arrangement, in
some causes is incorporated in the articles,
charters or by-laws of the separate vehicle. *Joint Control ~ the parties collectively control the
B4- Contractual arrangement sets out the terms arrangement because they are the only combination of
upon which the parties participate in the parties that can control and the parties must unanimously
activity that is the subject of the arrangement. agree. In case 3, there is also a joint control because a
B. Contractual Arrangement gives two or more single combination is sufficient to achieve the minimum
parties joint control of the arrangement. proportion or voting rights. (25%>20%)
Joint Control~ is the contractual agreed sharing of
control of an arrangement, which exists only when **No Joint Control ~ multiple combination of parties
decisions about the relevant activities require the could collectively control the arrangement, the
unanimous consent of the parties sharing control. contractual agreement does not specify which parties
(PFRS 11, part 7) must agree, there is no unanimous consent. The
arrangement is treated as an ASSOCIATE. (Case 2,
First key aspect of joint control assess whether the
both 25%, case 4, ONLY 70% and there are other
contractual arrangement gives all the parties or a
parties)
group of parties control the arrangement
collectively. (PFRS 11, part 8)
Contractual Terms In contributing an asset, the operator is as if selling a
proportion of that asset to the other joint operators
and retaining a proportion for itself.
If CA < FV, operator makes a profit.
Profit = FV- CA, of the proportion of the asset sold.
If joint arrangement is a partnership in nature,
separate accounting records do not need to be kept,
each joint operator records all the joint operation
transactions in their own books, whether he is a party
to the transactions or not, joint operators must inform
on time the other operators the transactions made by
him.
An account Investment in operation must be
maintained. The following transactions affect the
account: