International Financial Reporting Standards_guide.pdf

100 Chapter 9 Interests in Joint Ventures (IAS 31)
■ all the following conditions apply:
– the venturer is a wholly owned or partially owned subsidiary and its owners have
been informed and do not object to the venturer not applying proportionate consolidation
or the equity method;
– the venturer’s debt or equity instruments are not traded in a public market;
– the venturer is not in the process of issuing instruments that will be traded in a public
market; and
– the ultimate or any intermediate parent of the venturer produces consolidated financial
statements available for public use that comply with IFRS.
9.3 KEY CONCEPTS
9.3.1 A joint venture is a contractual arrangement whereby two or more parties undertake
an economic activity that is subject to joint control.
9.3.2 The following are characteristics of all joint ventures:
■ Two or more venturers are bound by a contractual arrangement.
■ A joint venture establishes joint control; that is, the contractually agreed sharing of control
over a joint venture is such that no one party can exercise unilateral control.
■ A venturer is a party to a joint venture and has joint control over that joint venture.
9.3.3 The existence of a contractual arrangement distinguishes joint ventures from associates.
It is usually in writing and deals with such matters as:
■ activity, duration, and reporting;
■ appointment of a board of directors or equivalent body and voting rights;
■ capital contributions by venturers; and
■ sharing by the venturers of the output, income, expenses, or results of the joint venture.
9.3.4 IAS 31 identifies three forms of joint ventures: jointly controlled operations, jointly
controlled assets, and jointly controlled entities.
9.3.5 Jointly controlled operations involve the use of resources of the venturers; they do
not establish separate structures. An example is when two or more parties combine resources
and efforts to manufacture, market, and jointly sell a product.
9.3.6 Jointly controlled assets refers to joint ventures that involve the joint control and
ownership of one or more assets acquired for and dedicated to the purpose of the joint venture
(for example, factories sharing the same railway line). The establishment of a separate
entity is unnecessary.
9.3.7 Jointly controlled entities are joint ventures that are conducted through a separate
entity in which each venturer owns an interest. An example is when two entities combine
their activities in a particular line of business by transferring assets and liabilities into a
jointly owned legal entity.
9.3.8 Proportionate consolidation is a method of accounting whereby a venturer’s share of
each of the assets, liabilities, income, and expenses of a jointly controlled entity is combined