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IFRS 11 — Acquisition of an interest in a joint operation

Background

The Interpretations Committee was asked whether the acquirer of interests in joint operations (as as defined in IFRS 11 Joint Arrangements) should apply the principles in IFRS 3 Business Combinations on initial recognition of the interest or whether the acquirer should instead account for it as the acquisition of a group of assets.

The Interpretations Committee concluded that the most appropriate approach to account for the acquisition of an interest in a joint operation that is a business was to apply the relevant principles for business combinations in IFRS 3 and other IFRSs.

The Interpretations Committee recommended to the IASB that new guidance, as part of a limited-scope project, was developed on IFRS 11 on accounting for the acquisition of an interest in a joint operation as defined in IFRS 11, in circumstances in which the activity of the joint operation constitutes a business as defined in IFRS 3 (a joint operation that is a business) on the basis of the business combinations guidance in IFRS 3 and other IFRSs.

The new guidance would only address the accounting for an interest in a joint operation when the joint operation is formed and there is an existing business that is contributed or where the acquisition of the interest is in an existing joint operation that is a business.

The limited-scope project will not address the accounting for an interest in a joint operation when the joint operation is formed and this coincides with the formation of the business.  Given the expected timing of finalisation of the project, accounting for the acquisition of interests under IAS 31 Interests in Joint Ventures was not considered in this project.

 

Current status of the project

This project has been completed.  The IASB issued Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) on 6 May 2014.

 

Project milestones

DateDevelopmentComments
September 2012 Tentatively added to the IASB agenda The IFRS Interpretations Committee recommended adding this project to the agenda
13 December 2012 ED/2012/7 Acquisition of an Interest in a Joint Operation (Proposed Amendment to IFRS 11) published Comment deadline 23 April 2013
6 May 2014 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) issued Effective for annual periods beginning on or after 1 January 2016*

* The amendments apply prospectively to acquisitions of interests in joint operations in which the activities of the joint operations constitute businesses, as defined in IFRS 3, for those acquisitions occurring from the beginning of the first period in which the amendments apply. Amounts recognised for acquisitions of interests in joint operations occurring in prior periods are not adjusted.