Deloitte Touche Tohmatsu Limited has responded to the IASB Exposure Draft ED/2012/7 Acquisition of an Interest in a Joint Operation.

We welcome the IASB’s initiative to address the lack of guidance in IFRS 11 Joint Arrangements in this area and agree that application of the principles of IFRS 3 Business Combinations is an appropriate methodology when the joint operation constitutes a business. However, we note that distinguishing between transactions on this basis (as would also be the case under the similar proposals of Exposure Draft ED/2012/6 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture) places additional emphasis on the definition of a business. As such, we support the work of the IFRS Interpretations Committee to produce additional guidance on the meaning and application of this concept as part of the IASB’s post-implementation review of IFRS 3.

However, we note that the scope of the exposure draft is limited and, as such, does not provide guidance on a number of common transactions in which interests in joint operations are acquired. We believe that these common transactions should be addressed as a matter of urgency. In addition, the implications of the proposals for other transactions (particularly the contribution of an existing business to a joint operation) need to be made clearer.

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