IFRS 11 Joint Arrangements - P2

IAS 31 has been replaced by IFRS 11 and the changes will be outlined here. Joint arrangement is an arrangement of which two or more parties have joint control, ie. contractually agreed sharing of control. Definition of control follows the one defined in IFRS 10.

Types of joint arrangements
There are only two types:
1. Joint operation - parties (joint operators) have rights to the assets and obligations for the liabilities relating to the joint arrangement.
2. Joint venture - parties (joint venturers) have rights to the net assets of the joint arrangement.

Accounting
1. Joint operator accounts for assets, liabilities, revenues and expenses in accordance with relevant IFRSs and only include the portion of share.
2. Joint venturer accounts for the investment using equity method (no more proportionate consolidation) in accordance with IAS 28. This means to present in statement of financial position initially at cost and subsequently increase/decrease with any share of profit/loss.

Therefore, the main changes are the classification of joint arrangement and the accounting for joint venture. This article does not intended to cover IFRS 11 in detailed.