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JOINT ARRANGEMENTS

A JOINT ARRANGEMENT is an arrangement over which two or more parties have joint control. JOINT CONTROL is the
contractually agreed sharing of control of an arrangement, which exists only when the decisions about the relevant activities
require the unanimous consent of the parties sharing control.

PFRS 11

TYPES OF JOINT
ARRANGEMENT (FULL PFRS)
JOINT OPERATION vs. JOINT VENTURE
Joint Operations Joint Venture

Terms of engagement The parties with joint control have rights to The parties with joint control have rights to the net
the assets and obligations for the liabilities assets of the arrangement.
of the arrangement

Rights to assets The parties share all interests in the The assets belong to the arrangement. The
assets in a specified proportion. parties to the arrangement do not have direct
rights, title or ownership of the assets.

Obligations for liabilities The parties share all liabilities, obligations, The joint arrangement is liable for the debts and
costs and expenses in a specified obligations of the arrangement. The venturers are
proportion. liable only to the extent of their investments.
Creditors do not have any recourse against any
The parties are liable as to third parties party in for debts or obligations
claiming on the arrangement.

Without a separate vehicle, the joint To be a joint venture, there must be a separate
arrangement is a joint operation. vehicle.

► Separate vehicle: A separately identifiable financial structure, including separate legal entities or entities
recognized by statute, regardless of whether those entities have a legal personality
PFRS 11 Accounting for SMEs

Jointly controlled assets

Joint Operations
Jointly controlled
operation
Joint Arrangement
Jointly controlled
Joint Venture (Equity entities
Method) (Equity, cost or fair value
model)
Jointly controlled operations
● Recognise its assets, liabilities, expenses, and its share of income.
Jointly controlled assets
● Recognise its assets, liabilities, revenue, and expenses, and/or its relative shares thereof.
Jointly controlled entities
● Equity method or proportionate consolidation

Note: The accounting for jointly controlled operations and assets that are now joint operations, and jointly controlled entities
now concluded to be joint ventures under PRFS11, will be unchanged in the separate financial statements.

Implicit Goodwill (Gain) FVNAA (Fair Value of Net Assets) xx


CoA (Cost of Acquisition) xx BVNAA (Book Value of Net Assets) (xx)
FVNAA (Fair Value of Net Assets Acquired) (xx) Excess fair value (Overvaluation) xx(xx)
Goodwill (Gain on Bargain Purchase) xx(xx)
Note: Any difference between the fair value and carrying
amount of assets acquired should be amortized and
Note: Goodwill is included in the amount of Investment in treated as an adjustment to investment income.
Joint Venture. Not amortized under Full PFRS but Amortization of excess fair value is a deduction from
amortized under PFRS for SMEs. investment income, while amortization of overvaluation is
an additional investment income.
Disposal of investment or Loss of Joint control
Disposal, addition or loss of joint control may lead to
derecognition of investment in JV account. In this regard,
Fair Value of retained interest xx
applicable standards should be used depending on what
Proceeds from sale of portion of investment xx
investment characteristic is obtained such as for example Total xx
a passive investment, investment with significant influence Carrying amount of investment (xx)
or investment with control. Gain (Loss) on derecognition xx

JOURNAL ENTRIES
EQUITY METHOD COST MODEL FAIR VALUE MODEL

Acquisition of Investment in JV xx Investment in JV xx Investment in JV xx


Investment
Cash xx Cash xx Cash xx

(Purchase Price + Transaction (Purchase Price + Transaction (Purchase Price ONLY)


Cost) Cost)

Share in Profit Investment in JV xx No entry No entry

Investment income xx

*Prorated, in case of investment


acquired in interim

Share in Loss Investment Loss xx No entry No entry

Investment in JV xx

*Should not exceed amount of


investment. Subsequent share in
profit should be deducted any
unrecognized loss in prior years.

Dividend Cash xx Cash xx Cash xx


Distribution
Investment in JV xx Dividend income xx Dividend income xx

(recognize whole year dividend) (recognize whole year dividend) (recognize whole year dividend)

Amortization of Investment income xx


excess
Investment in JV xx

Amortization of Investment in JV xx
overvaluation
Investment income xx

FV Adjustment No entry No entry Investment in JV xx

Gain on investment xx

Or

Loss on investment xx

Investment in JV xx

Impairment Impairment Loss xx Impairment Loss xx No impairment testing

Investment in JV xx Investment in JV xx

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