Section 3440: Joint Ventures
International Accounting Standard 31
Interests in Joint Ventures
1. First version of IAS 31
"Financial reporting of interests in joint ventures" issued in December 1990
2. Revisions
December 2003: Interests in joint ventures
[U.S. GAAP Codification Topic]
323-30 Partnerships and unincorporated joint ventures
3. Joint Venture
An arrangement by a contract to have
--> joint control over an economic activity
--> for two ore more parties
4. Joint Control
Sharing of control, agreed by a contract
5. Venturer
Venturers have joint control, over a joint venture
6. Investor
Investors in a joint venture, do not have joint control
7. Three forms of joint venture
(1) Jointly controlled operations
(2) Jointly controlled assets
(3) Jointly controlled entities
8. Common characteristics of joint venture
(1) Joint control by a contract
(2) a contract binds two or more venturers
9. Jointly Controlled Operations
A venturer of jointly controlled operations recognises the following
in the financial statements
(1) assets controlled
(2) liabilities incurred
(3) expenses incurred
(4) its share of income from joint venture
10. Jointly Controlled Assets
A venturer of jointly controlled assets recognises the following
in the financial statements
(1) its share of jointly controlled assets
(2) liabilities incurred
(3) its share of liabilities incurred jointly
(4) expenses incurred
(5) its share of expenses incurred jointly
(6) income from its share of output of joint venture
11. Jointly Controlled Entities, IAS 31.30
A venturer of jointly controlled entities recognises its interests using (1) or (2)
(1) proportionate consolidation
(2) equity method
Equity method is permitted by IAS 31, however, not recommended by IAS 31, IAS 31.40
12. Proportionate Consolidation, IAS 31.33
A venturer includes the following
in its financial statements
(1) its share of assets of jointly controlled entities
(2) its share of liabilities of jointly controlled entities
(3) its share of income of jointly controlled entities
(4) its share of expenses of jointly controlled entities
13. Proportionate Consolidation: Reporting Formats
Both format 1 and format 2 are accepted by IAS 31
Format 1:
--> Combine its share of (1) with similar items in its financial statements, line by line
--> (1) assets, liabilities, income, expenses of jointly controlled entity
Format 2
--> Separate line items for its share of (2), in its financial statements
--> (2) assets, liabilities, income, expenses of jointly controlled entity
14. Sale and purchase between venturer and joint venture, IAS 31.48
If a venturer contributes or sells an asset to joint venture
Venturer's recognition of a gain or loss
--> should reflect the substance of transaction
15. Venturer purchases an asset from joint venture, IAS 31.49
Venturer does not recognise
--> its share of profit or loss from the transaction until (1)
--> (1) when venturer sells the asset to independent party
16. SIC Interpretation 13, December 1998
"Jointly controlled entities: non-monetary contributions by venturers"
If venturer contributes a non-monetary asset to JCE, Jointly Controlled Entities,
and receives an equity interest in JCE
--> Venturer recognises only the portion of gain or loss
--> attributable to the interests of other venturers
17. SIC Interpretation 13
Venturer does not recognise gain or loss, in the following cases:
(1) transaction does not have commercial substance
(2) gain or loss cannot be reliably measured
(3) risks and rewards or ownership were not transferred, i.e., gain or loss was not realised | 
Index of IFRS Financial Reporting Textbook
