Core principle
The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint arrangement in which it is involved by
assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. [IFRS 11:1-2]
Key definitions
[IFRS 11:Appendix A]
| Joint arrangement |
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An arrangement of which two or more parties have joint control
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| Joint control |
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The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require
the unanimous consent of the parties sharing control
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| Joint operation |
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A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the
liabilities, relating to the arrangement
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| Joint venture |
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A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement
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| Joint venturer |
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A party to a joint venture that has joint control of that joint venture
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Party to a joint arrangement
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An entity that participates in a joint arrangement, regardless of whether that entity has joint control of the arrangement
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| Separate vehicle |
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A separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether
those entities have a legal personality |
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. [IFRS 11:4]
A joint arrangement has the following characteristics: [IFRS 11:5]
- the parties are bound by a contractual arrangement, and
- the contractual arrangement gives two or more of those parties joint control of the arrangement.
A joint arrangement is either a joint operation or a joint venture. [IFRS 11:6]
Joint control
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control. [IFRS 11:7]
Before assessing whether an entity has joint control over an arrangement, an entity first assesses whether the parties, or a group of the parties,
control the arrangement (in accordance with the definition of control in IFRS 10 Consolidated Financial Statements). [IFRS 11:B5]
After concluding that all the parties, or a group of the parties, control the arrangement collectively, an entity shall assess whether it has
joint control of the arrangement. Joint control exists only when decisions about the relevant activities require the unanimous consent of the parties
that collectively control the arrangement. [IFRS 11:B6]
The requirement for unanimous consent means that any party with joint control of the arrangement can prevent any of the other parties, or a group
of the parties, from making unilateral decisions (about the relevant activities) without its consent. [IFRS 11:B9]
Types of joint arrangements
Joint arrangements are either joint operations or joint ventures:
- A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. [IFRS 11:15]
- A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
of the arrangement. Those parties are called joint venturers. [IFRS 11:16]
Classifying joint arrangements
The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the
arrangement. An entity determines the type of joint arrangement in which it is involved by considering the structure and form of the arrangement,
the terms agreed by the parties in the contractual arrangement and other facts and circumstances. [IFRS 11:6, IFRS 11:14, IFRS 11:17]
Regardless of the purpose, structure or form of the arrangement, the classification of joint arrangements depends upon the parties' rights and
obligations arising from the arrangement. [IFRS 11:B14; IFRS 11:B15]
A joint arrangement in which the assets and liabilities relating to the arrangement are held in a separate vehicle can be either a joint venture
or a joint operation. [IFRS 11:B19]
A joint arrangement that is not structured through a separate vehicle is a joint operation. In such cases, the contractual arrangement establishes
the parties' rights to the assets, and obligations for the liabilities, relating to the arrangement, and the parties' rights to the corresponding
revenues and obligations for the corresponding expenses. [IFRS 11:B16]
Financial statements of parties to a joint arrangement
Joint operations
A joint operator recognises in relation to its interest in a joint operation: [IFRS 11:20]
- its assets, including its share of any assets held jointly;
- its liabilities, including its share of any liabilities incurred jointly;
- its revenue from the sale of its share of the output of the joint operation;
- its share of the revenue from the sale of the output by the joint operation; and
- its expenses, including its share of any expenses incurred jointly.
A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation in accordance with the
relevant IFRSs. [IFRS 11:21]
A party that participates in, but does not have joint control of, a joint operation shall also account for its interest in the arrangement in
accordance with the above if that party has rights to the assets, and obligations for the liabilities, relating to the joint operation. [IFRS 11:23]
Joint ventures
A joint venturer recognises its interest in a joint venture as an investment and shall account for that investment using the equity method in
accordance with IAS 28 Investments in Associates and Joint Ventures unless the entity is exempted from applying the
equity method as specified in that standard. [IFRS 11:24]
A party that participates in, but does not have joint control of, a joint venture accounts for its interest in the arrangement in accordance with
IFRS 9 Financial Instruments unless it has significant influence over the joint venture, in which case it accounts
for it in accordance with IAS 28 (as amended in 2011). [IFRS 11:25]
Separate Financial Statements
The accounting for joint arrangements in an entity's separate financial statements depends on the involvement of the entity in that joint
arrangement and the type of the joint arrangement:
- If the entity is a joint operator or joint venturer it shall account for its interest in
- a joint operation in accordance with paragraphs 20-22;
- a joint venture in accordance with paragraph 10 of IAS 27 Separate Financial Statements. [IFRS 11:26]
- If the entity is a party that participates in, but does not have joint control of, a joint arrangement shall account for its interest in:
- a joint operation in accordance with paragraphs 23;
- a joint venture in accordance with IFRS 9, unless the entity has significant influence over the joint venture,
in which case it shall apply paragraph 10 of IAS 27 (as amended in 2011). [IFRS 11:27]
Disclosure
There are no disclosures specified in IFRS 11. Instead, IFRS 12 Disclosure of Interests in Other Entities
outlines the disclosures required.
Applicability and early adoption
IFRS 11 is applicable to annual reporting periods beginning on or after 1 January 2013. [IFRS 11:Appendix C1]
Special transitional provisions are included for: [IFRS 11.Appendix C2-C13]
- transition from proportionate consolidation to the equity method for joint ventures
- transition from the equity method to accounting for assets and liabilities for joint operations
- transition in an entity's separate financial statements for a joint operation previously accounted for as an investment at cost.
An entity may apply IFRS 11 to an earlier accounting period, but if doing so it must disclose the fact that is has early adopted the standard
and also apply: [IFRS 11.Appendix C1]
- IFRS 10 Consolidated Financial Statements
- IFRS 12 Disclosure of Interests in Other Entities
- IAS 27 Separate Financial Statements (as amended in 2011)
- IAS 28 Investments in Associates and Joint Ventures (as amended in 2011).
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