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Joint Arrangements — Disclosures and transition (for associates as well)

Date recorded:

The Board discussed the disclosure requirements for joint arrangements and associates. Those disclosures form part of the comprehensive disclosure standard for a reporting entity's involvement with other entities that is not in the scope of IAS 39/IFRS 9.

Disclosure principle for joint arrangements and associates

The Board agreed to align the disclosures for joint arrangements (especially joint ventures) and associates (since they both use the equity method).

Disclosure of the basis of joint control and significant influence

The Board agreed to carry forward to the IFRS the requirements in IAS 28 paragraphs 37(c) and 37(d); however, those requirements did not need to be aligned by requiring disclosures of the basis of joint control.

A list and description of investments in significant joint ventures, associates, and subsidiaries

The Board agreed (by majority) that:

  • the IFRS should require disclosure of a list and description of interests in significant joint arrangements (rather than joint ventures); and
  • the consequential amendment restoring the equivalent requirement in relation to significant associates was confirmed.

A Board member objected to the use of the term 'significant' because he thought it was ambiguous (significant to whom?) and preferred the term 'material'. He was a lone voice on this issue.

Commitments

The Board agreed (by majority) to require disclosure of commitments of all types to joint ventures. A proposal to extend this disclosure to associates was not supported by a majority of the Board. In explaining the distinction, it was noted that the existence of the joint arrangement contract gave the entity less freedom with respect to commitments to a joint venture. Users were interested in the degree of financial flexibility of the venture. In the situation of an investor in an associate, it was likely that it would have greater discretion to delay meeting the commitment.

'Contingent' liabilities

The Board agreed to retain the proposal in ED9 paragraph 38 related to 'contingent' liabilities incurred relating to the venturer's interest in the joint venture and the venturer's share of 'contingent' liabilities incurred jointly with other parties. In response to a Board member's question about using antiquated terminology, the staff responded that the wording would be aligned to that used in the IFRS replacing IAS 37.

Disclosure requirements affecting joint operations

Summarised financial information for 'joint operations'

The Board agreed not to require summarised financial information for those arrangements that are 'joint operations' under the IFRS.

Summarised financial information for each individually material joint venture

The Board discussed whether to align the aggregation in the disclosure requirements of summarised financial information for joint ventures and associates, independently from the measurement method both types of investment are accounted for, to be 'either individually or in groups'. Several Board members objected to this recommendation because it provided no real guidance and lacked sufficient rigor to make it operational.

The staff agreed to return at a later session with a better articulated recommendation.

Granularity of disclosure - statement of financial position

The Board agreed to require the following disclosures (in aggregate) related to investments in joint ventures (additions to those required in ED9 are underlined):

  • cash;
  • current assets;
  • non-current assets;
  • financial liabilities, excluding trade and other payables and provisions;
  • current liabilities;
  • non-current liabilities

Some Board members did not support these disclosures at all - noting that they seemed to run contrary to the Board's preference for the equity method in that they were designed to enable a user to construct an artificial 'net debt' number with cash and liabilities that were not the investor's/venturer's.

Granularity of disclosure - statement of comprehensive income

The Board agreed to require the following disclosures (in aggregate) related to investments in joint ventures (additions to those required in ED9 are underlined):

  • revenues;
  • depreciation and amortisation;
  • interest revenue;
  • interest expense;
  • income tax expense or income; and
  • profit or loss.

In addition, disclosure would be required by the venture/ investor of dividends received from the joint venture.

Granularity of disclosure - Associates

The Board discussed but was strongly opposed to a proposal to provide summarised financial information for associates including current and non-current assets; current and non-current liabilities. The staff did not pursue the recommendations and will return with alternative proposals at a later session.

Disclosure requirements for joint ventures held by venture capital organisations, or mutual funds, unit trusts and similar entities including investment-linked insurance funds

The Board decided to reverse a proposal in ED9 and retain the disclosure required by IAS 28.37(i) that requires disclosure of summarised financial information of associates, either individually or in groups, that are not accounted for using the equity method, including the amounts of total assets, total liabilities, revenues, and profit or loss.

The Board agreed that information about the activities of the associate was relevant whatever basis was used for measuring the net investment. In addition, even though the need for similar requirements in the case of joint ventures might be more limited, the Board agreed to align the disclosure requirements for joint ventures and associates.

Fair value of investments in joint ventures for which there are published price quotations

IAS 28 requires an entity to disclose 'the fair value of investments in associates for which there are published price quotations'. The Board agreed to extend this requirement to joint ventures, acknowledging that published price quotations for joint ventures might not be common.

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