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Proposal to replace IAS 31 on joint ventures

  • IASB Exposure Draft (original) Image

13 Sep 2007

The IASB has published for public comment Exposure Draft 9 proposing to replace IAS 31 'Interests in Joint Ventures' with a new standard to be titled 'Joint Arrangements'.

A joint arrangement is a contractual arrangement whereby two or more parties undertake an economic activity together and share decision-making relating to that activity. Joint arrangements include joint assets, joint operations, and joint ventures. The Exposure Draft is now available for eIFRS subscribers and will be freely available on the IASB's website from 27 September. Comment deadline is 11 January 2008.

The main focus of the proposals is on the two aspects of the current accounting for joint arrangements that the IASB considers are an impediment to high quality reporting:

  • The current accounting for joint arrangements follows the legal form in which the activities take place. This does not always reflect the contractual rights and obligations agreed to by the parties. Shifting the focus to these rights and obligations will provide a more realistic reflection of the joint arrangement in the financial reports of the parties involved.
  • The existing standard gives preparers a choice when accounting for interests in jointly controlled entities (equity method and proportionate consolidation), making it difficult to compare financial reports. The IASB proposes to remove that choice by requiring parties to recognise both the individual assets to which they have rights and the liabilities for which they are responsible, even if the joint arrangement operates in a separate legal entity. If the parties only have a right to a share of the outcome of the activities their net interest in the arrangement will be recognised using the equity method.
The ED also proposes new requirements for disclosing information about joint arrangements, subsidiaries, and associates, including a description of the nature of joint arrangements and summarised financial information relating to an entity's interests in joint ventures.

Click for Press Release (PDF 66k).

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