International Accounting Standard 31

Interests in Joint Ventures

IAS 31,Interests in Joint Ventures

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VII.

Objectives
Definitions
Forms of Joint Ventures
Jointly Controlled Operations
Jointly Controlled Assets
Jointly Controlled Entities
Disclosure

IAS 31,Interests in Joint Ventures

Definitions

A Joint Venture is a contractual

arrangement whereby two or more
parties undertake an economic activity
Control is the power to govern the
financial and operating policies of an
economic activity so as to obtain
benefits from it
Joint control is the contractually agreed
sharing of control over an economic
activity

IAS 31,Interests in Joint Ventures

Forms of Joint Venture

IAS identifies three broad types:

Jointly Controlled Operations

Jointly Controlled Assets

Jointly Controlled Entities

IAS 31,Interests in Joint Ventures

Jointly Controlled Operations

Description
Two or More ventures combine their
operations, resources and expertise in
order to manufacture, market and
distribute jointly a particular product.

IAS 31,Interests in Joint Ventures

Jointly Controlled Operations

Presentation and Accounting

A venture should recognize in its separate

financial statements:

The assets that it controls and the liabilities

that it incurs; and
The expenses that it incurs and its share of
the income that it earns from the sales of
goods or services by the joint venture.

IAS 31,Interests in Joint Ventures

Jointly Controlled Assets

Description

This type of joint venture involves the

joint control and ownership of one or
more assets contributed to the purposes
of the joint venture.

Each venture may take a share of the

output from the assets and each bears
an agreed share of the expenses
incurred.

IAS 31,Interests in Joint Ventures

Jointly Controlled Assets

Description

These joint ventures do not involve the

establishment of a corporation,
partnership or other entity, or a financial
structure that is separate from the
ventures themselves, example:
pipelines.

IAS 31,Interests in Joint Ventures

Jointly Controlled Assets

Presentation and Accounting

Each venture should include the following items in its
accounting records:

Its share of the jointly controlled assets

Any liabilities which it has incurred on behalf of

the joint venture

Its share of income, together with its share of

any expenses incurred by the joint venture

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

Description

This is a joint venture, which involves

the establishment of a corporation,
partnership or other entity in which each
venturer has an interest

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

Description

A jointly controlled entity controls the

assets of the joint venture, incurs
liabilities and expenses and earns
income. It may enter into contracts in its
own name and raise finance for the
purposes of the joint venture activity.

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

Description

A jointly controlled entity maintains its

own accounting records and prepares
and presents financial statements (e.g.
under IFRS) in the same way as other
entities.

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

Presentation and Accounting

A venture shall recognize its interest in a

jointly controlled entity using either
proportionate consolidation or the equity
method.

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

Transactions between venture

and a joint venture
When a venture sells assets to a joint
venture, the venture recognizes only
that portion of the gain or loss that is
attributable to the interests of the
other ventures.

IAS 31,Interests in Joint Ventures

Jointly Controlled Entities

SIC-13: Jointly Controlled Entities-Non-Monetary

Contributions by Ventures

A joint venture may contribute non-monetary

assets to a jointly-controlled entity in exchange
for an equity interest in the jointly-controlled
entity.

The issue is when should a joint venture

recognize the appropriate portion of any gains or
losses resulting from a contribution in its income
statement.

IAS 31,Interests in Joint Ventures

Disclosure

Contingencies

A venture should disclose the aggregate amount

of the contingent liabilities, unless the probability
of loss is remote, separately from the amount of
other contingent liabilities.

A venture discloses the aggregate amount of any

capital commitments in respect of its interests in
joint ventures separately from other
commitments

IAS 31,Interests in Joint Ventures

Disclosure

Interests
A venture should list and describe
interests in significant joint ventures
and the proportion of ownership
interest held in jointly controlled
entities.

IAS 31,Interests in Joint Ventures

Disclosure

Interests
A venture which reports its interests in jointly controlled
entities using the line by line reporting format for
proportionate consolidation or the equity method should
disclose the aggregate amounts of each of:

Current assets
Long term assets
Current liabilities
Long term liabilities
Income and expenses related to its interests in joint
ventures.

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