(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009Section 15Investments in Joint VenturesScope of this section15.1 This section applies to accounting for joint ventures in consolidated financialstatements and in the financial statements of an investor that is not a parent butthat has a venturer’s interest in one or more joint ventures. Paragraph 9.26establishes the requirements for accounting for a venturer’s interest in a jointventure in separate financial statements.Joint ventures defined15.2 Joint control is the contractually agreed sharing of control over an economicactivity, and exists only when the strategic financial and operating decisionsrelating to the activity require the unanimous consent of the parties sharingcontrol (the venturers).15.3 A joint venture is a contractual arrangement whereby two or more partiesundertake an economic activity that is subject to joint control. Joint ventures cantake the form of jointly controlled operations, jointly controlled assets, or jointlycontrolled entities.Jointly controlled operations15.4 The operation of some joint ventures involves the use of the assets and otherresources of the venturers rather than the establishment of a corporation,partnership or other entity, or a financial structure that is separate from theventurers themselves. Each venturer uses its own property, plant and equipmentand carries its own inventories. It also incurs its own expenses and liabilities andraises its own finance, which represent its own obligations. The joint ventureactivities may be carried out by the venturer’s employees alongside the venturer’ssimilar activities. The joint venture agreement usually provides a means by whichthe revenue from the sale of the joint product and any expenses incurred incommon are shared among the venturers.15.5 In respect of its interests in jointly controlled operations, a venturer shallrecognise in its financial statements:(a)(b)the assets that it controls and the liabilities that it incurs, andthe expenses that it incurs and its share of the income that it earns fromthe sale of goods or services by the joint venture.Jointly controlled assets15.6 Some joint ventures involve the joint control, and often the joint ownership, bythe venturers of one or more assets contributed to, or acquired for the purpose of,the joint venture and dedicated to the purposes of the joint venture.© IASCF 85