Joint Ventures

Date recorded:

At this meeting, the Board addressed scope section and loss of joint control section of the proposed Standard. In March, the Board will discuss transition provisions and disclosures. The Board expects publication of the final Standard at the end of the second quarter of 2010.


The Board briefly discussed a wording change in the scope paragraph of the proposed Standard that would require all entities to account for interests in joint arrangements using this Standard. The current scope exemption for investment company type venturers would be incorporated in the measurement section, that is, those entities would be still permitted to use fair value instead of the equity method.

The staff justified this change by tying to clean the standard as, currently under IAS 31, disclosures requirements of IAS 31 are required for these entities, even though they are scoped out from measurement requirements.

Some Board members felt uneasy and questioned why such a proposal is made at such a late stage. In addition they questioned the logic of consequential amendments to IAS 28, when an annual improvement is being deliberated at the same time and expressed their concerns that two changes will be made in the same 'scope' paragraph in a very short period time, potentially with two different effective dates.

One Board member expressed his preference for the current guidance as he preferred a scope exemption from two different measurement bases in the Standard. Finally, with a bare majority of votes, the Board approved the proposed change. On the annual improvement issue, the Board noted that it would incorporate the annual improvement related to scope paragraph of IAS 28 into consequential amendments of IAS 28 when the final Joint Arrangements Standard is published, to avoid two successive changes to IAS 28 scope paragraph.

Loss of Joint Control

The Board briefly discussed the measurement requirements related to loss of joint control in particular, when a reporting entity has an investment that changes from being a joint venture to become an associate

The Board agreed that as the measurement method is maintained in this case (equity method), no remeasurement is required. One Board member suggested to clarify that this principle would apply in the reverse order as well (associate becoming a joint venture), but the Board decided to remain silent on this point and allow constituents to analogise the accounting treatment to the guidance provided.

The staff noted that partial disposal issues would be addressed at a later stage of the project.

The Board also agreed to redefine 'significant economic event' as an event that changes the nature of the investment and affects group boundaries and consequently remove all descriptions that associate loss of joint control and loss of significant influence in current standards to 'significant economic events'.

Finally, the Boards agreed that Joint Arrangement Standard should confirm that change from joint control to significant influence result in partial disposal in IAS 21 and explain the removal of 'significant economic influence' in Basis for Conclusion in IAS 21.

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