PFRS 11 Joint Arrangements

Control alone? 2

Consolidate using YES NO Joint control?

PFRS 10
YES NO
PFRS 12 Disclosures Decide type of joint
Significant
arrangement using
influence?
PFRS 11
Joint Operation Joint Venture YES NO
Account for assets,
Account for investment PFRS 9
liabilities, revenues and
using PAS 28
expenses
PFRS 12 Disclosures PFRS 12 Disclosures
What needed to be improved? 3

Structure of the joint arrangement The structure of

the arrangement is
the only driver for
Not structured through an Structured through an entity the accounting
entity

Jointly Jointly
controlled controlled Jointly controlled entities
operations assets When
arrangements are
option structured in
entities, preparers
Accounting for assets, liabilities,
have an
revenues and expenses in Proportionate Equity method accounting
accordance with the contractual consolidation
arrangements
option
The principle in
PFRS 11 4

PFRS 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
The assessments required
5

JOINT CONTROL
No
Outside the
Do all the parties, or a group of scope of PFRS 11
the parties, have joint control
over the arrangement?

Yes

TYPE OF Joint operation

JOINT ARRANGEMENT

Analysis of the parties’ rights

and obligations arising from the Joint venture
arrangement
 PFRS 11: Assessment of joint control
6

No Outside the
Does the contractual arrangement scope of
give all the parties, or a group of the PFRS 11
parties, control of the arrangement
collectively?

Yes
 PFRS 11: Assessing joint control 7

Does the contractual arrangement No Outside the

give all the parties, or a group of the scope of
parties, control of the arrangement PFRS 11
collectively?
Yes
Do decisions about the relevant
activities require the unanimous No Outside the
consent of all the parties, or of a group scope of
of the parties, that collectively control PFRS 11
the arrangement?
Yes
 PFRS 11: Assessing joint control 8

Does the contractual arrangement No Outside the

give all the parties, or a group of the scope of
parties, control of the arrangement PFRS 11
collectively?
Yes
Do decisions about the relevant
activities require the unanimous No Outside the
consent of all the parties, or of a group scope of
of the parties, that collectively control PFRS 11
the arrangement?
Yes
The arrangement is jointly controlled.
The arrangement is a joint arrangement.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
PFRS 11: Assessing the classification 9

Joint
Analysis of the parties’ operation
rights and obligations
arising from the
arrangement
Joint
venture

© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
PFRS 11: Assessing the classification 10

Not structured through a Structured through a

separate vehicle * separate vehicle *
Assessment
of the
Assess the parties’ rights and obligations
parties’
arising from the arrangement by considering: rights and
obligations
(a) the legal form of the separate vehicle
(b) the terms of the contractual
arrangement, and, if relevant,
(c) other facts and circumstances

Parties have rights to the assets Parties have rights

and obligations for the liabilities to the net assets

Joint operation Joint venture

Accounting
reflects
Accounting for assets, liabilities, revenues and Accounting for an
the parties’
expenses in accordance with the contractual investment using the rights and
arrangements equity method obligations
PFRS 11: Assessing the classification 11

Not structured through a separate vehicle

Parties have rights to

the assets and
obligations for the
liabilities
Joint operation

Account for assets, liabilities, revenues and expenses in

accordance with the contractual arrangements
PFRS 11: Assessing the classification 12

Structured through a separate vehicle

Consider: - the legal form of the separate vehicle,

- the terms of the contractual arrangement,
- when relevant, other facts and circumstances

Parties have rights to the assets Parties have rights

and obligations for the liabilities to the net assets

Joint operation Joint venture

Account for assets, liabilities, Account for an investment using

revenues and expenses the equity method
PFRS 11: Assessing the classification 13

Legal form of the Does the legal form of the separate vehicle
separate vehicle give the parties rights to the assets and
obligations for the liabilities, relating to the
arrangement?
Yes
No
Terms of the Do the terms of the contractual arrangement
contractual specify that the parties have rights to the
Joint
arrangement assets, and obligations for the liabilities,
Operation
relating to the arrangement? Yes

No
Other facts and Have the parties designed the arrangement
circumstances so that
(a) its activities primarily aim to provide the
parties with an output (ie the parties have Yes
rights to substantially all the economic
benefits of the assets held in the
separate vehicle) and
(b) (b) it depends on the on the parties on a
continuous basis for settling the liabilities
relating to the activity conducted through
the arrangement?
No
Joint Venture
PFRS 12: Disclosures for joint arrangements 14

Description of the nature, extent and the financial effects

of an entity’s interests in joint arrangements

Joint Joint
operations ventures

Summarised financial information for

each individually material joint venture
and in total for all other joint ventures.
• Nature, extent and financial effects of interests in joint arrangements,
including:
– List and nature of interests in individually-material joint arrangements
– Detailed quantitative summarised financial information for each individually material JV, and
in total for all others (see next slide)
– Unrecognised share of losses of JVs
– Fair value of investments in individually material JVs (if published quoted prices available)
– Significant restrictions on transferring funds
• Nature of, and changes in, the risks associated with the involvement
PFRS 12: Summarized financial information for material joint ventures
16
Dividends received from the joint venture
Summarised financial information including, but not limited to:
− cash and cash equivalents included in current assets;
− current assets;
− non-current assets;
− current liabilities;
− current financial liabilities included in current liabilities;
− non-current liabilities;
− non-current financial liabilities included in non-current liab.;
− revenue;
− depreciation and amortisation;
− interest income; Underline indicates
− interest expense; new disclosure
− profit or loss from continuing operations;
− income tax expense or income;
− post-tax profit or loss from discontinued operations;
− other comprehensive income; and
− total
© 2011 IFRScomprehensive
Foundation. 30 Cannonincome.
Street | London EC4M 6XH | UK.
www.ifrs.org