Overview

This Section establishes standards for investments in arrangements in which the investor has joint control. However, this Section does not deal with accounting by joint arrangements themselves.

A joint arrangement is an economic activity resulting from a contractual arrangement whereby two or more investors jointly control the economic activity.  There are 3 types of joint arrangements:

Jointly controlled operations

The operations of some joint arrangements involve the use of the assets and other resources of the investors, rather than the establishment of a corporation, partnership or other enterprise, or a financial structure that is separate from the investors themselves. Each investor uses its own property, plant and equipment and carries its own inventories for the purposes of the joint arrangement activities. The assets remain under the ownership and control of each investor. Each investor also incurs its own expenses and liabilities and raises its own financing, which represents its own obligations. The joint arrangement activities may be carried out by the investor's employees alongside the investor's similar activities. The contractual arrangement usually provides a means by which the revenue from the sale of goods or services by the joint arrangement and any expenses incurred in common are shared among the investors.

An investor in jointly controlled operations has rights to the individual assets and obligations for the individual liabilities relating to the joint arrangement.  An investor in a jointly controlled operation in which the investor has joint control should recognize:

1. in its balance sheet, the assets that it controls and the liabilities that it incurs; and
2. in its income statement, its share of the revenue of the joint arrangement and its share of the expenses incurred by the joint arrangement.

Jointly controlled assets

Some joint arrangements involve the joint control, and often the joint ownership, by the investors of one or more assets contributed to, or acquired for the purpose of, the joint arrangement and dedicated to the purposes of the joint arrangement. Jointly controlled assets are used to obtain benefits for the investors. Each investor may take a share of the output from the assets and each bears an agreed share of the expenses incurred. Such a joint arrangement does not involve the establishment of a corporation, partnership or other enterprise, or a financial structure that is separate from the investors themselves.

An investor in jointly controlled assets has rights to the individual assets and obligations for the individual liabilities relating to the joint arrangement.  An investor in jointly controlled assets in which the investor has joint control should recognize:

1. in its balance sheet, its share of the jointly controlled assets and its share of any liabilities incurred jointly with the other investors in relation to the joint arrangement; and
2. in its income statement, any revenue from the sale or use of its share of the output of the joint arrangement, and its share of any expenses incurred by the joint arrangement.

Jointly controlled enterprises

A jointly controlled enterprise is a joint arrangement that involves the establishment of a corporation, partnership or other enterprise in which each investor has an interest. The enterprise operates in the same way as other enterprises, except that a contractual arrangement between the investors establishes joint control over the economic activity of the enterprise.

An investor in a jointly controlled enterprise generally has rights to the net assets of the joint arrangement rather than rights to the individual assets and obligations for the individual liabilities. An investor with an interest in a jointly controlled enterprise shall make an accounting policy choice to:

1. account for all such interests using the equity method;
2. account for all such interests using the cost method; or
3. perform an analysis of each such interest and determine whether it represents a right to the net assets or to the individual assets and obligations for the individual liabilities relating to the joint arrangement and: (i) account for all interests in the net assets of a jointly controlled enterprise in accordance with either paragraph 3056.29(a) or (b); and (ii) account for all interests representing rights to the individual assets and obligations for the individual liabilities relating to a joint arrangement in accordance with paragraphs 3056.17-.18.

History of Section 3056

Note: The above summary does not include details of consequential amendments made as the result of other projects.

Private Enterprise Advisory Committee Meeting Notes

• November 7, 2017 - Items to Address but Considered to Be Outside the Scope of the Annual Improvements: Accounting for Interests in Joint Arrangements
• April 14, 2016 - Subsidiaries and Interests in Joint Arrangements

Amendments under consideration

• None