Prepared by Mosbah Majzoub, CPA1 International Accounting Standard 31 Interests in Joint Ventures

Prepared by Mosbah Majzoub, CPA2 IAS 31,Interests in Joint Ventures I.Objectives II.Definitions III.Forms of Joint Ventures IV.Jointly Controlled Operations V.Jointly Controlled Assets VI.Jointly Controlled Entities VII.Disclosure

Prepared by Mosbah Majzoub, CPA3 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

Prepared by Mosbah Majzoub, CPA4 IAS 31,Interests in Joint Ventures Forms of Joint Venture  IAS identifies three broad types: Jointly Controlled Operations Jointly Controlled Assets Jointly Controlled Entities

Prepared by Mosbah Majzoub, CPA5 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.

Prepared by Mosbah Majzoub, CPA6 IAS 31,Interests in Joint Ventures Jointly Controlled Operations  Presentation and Accounting A venturer should recognise 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. Example 1

Prepared by Mosbah Majzoub, CPA7 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 venturer may take a share of the output from the assets and each bears an agreed share of the expenses incurred.

Prepared by Mosbah Majzoub, CPA8 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.

Prepared by Mosbah Majzoub, CPA9 IAS 31,Interests in Joint Ventures Jointly Controlled Assets  Presentation and Accounting Each venturer 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

Prepared by Mosbah Majzoub, CPA10 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

Prepared by Mosbah Majzoub, CPA11 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.

Prepared by Mosbah Majzoub, CPA12 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.

Prepared by Mosbah Majzoub, CPA13 IAS 31,Interests in Joint Ventures Jointly Controlled Entities  Presentation and Accounting A venturer shall recognise its interest in a jointly controlled entity using either proportionate consolidation or the equity method. Example 2

Prepared by Mosbah Majzoub, CPA14 IAS 31,Interests in Joint Ventures Jointly Controlled Entities  Transactions between venturer and a joint venture When a venturer sells assets to a joint venture, the venturer recognizes only that portion of the gain or loss that is attributable to the interests of the other ventures. Example 3

Prepared by Mosbah Majzoub, CPA15 IAS 31,Interests in Joint Ventures Jointly Controlled Entities  SIC-13: Jointly Controlled Entities-Non-Monetary Contributions by Ventures A joint venturer 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 recognise the appropriate portion of any gains or losses resulting from a contribution in its income statement.

Prepared by Mosbah Majzoub, CPA16 IAS 31,Interests in Joint Ventures Disclosure  Contingencies A venturer 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 venturer discloses the aggregate amount of any capital commitments in respect of its interests in joint ventures separately from other commitments

Prepared by Mosbah Majzoub, CPA17 IAS 31,Interests in Joint Ventures Disclosure  Interests A venturer should list and describe interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities.

Prepared by Mosbah Majzoub, CPA18 IAS 31,Interests in Joint Ventures Disclosure  Interests A venturer 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. Example 4

Prepared by Mosbah Majzoub, CPA19 Thank you for listening Any Questions ???