Joint Arrangements

JOINT ARRANGEMENTS
Nature of
Type of Interest in voting
relationship with Standard Accounting
investment rights of investee
investee
FVPL or FVOCI
Regular investor Less than 20% PFRS 9 Fair value
asset
Significant Investment in
20% to 50% PAS 28 Equity method
influence associate
Control Investment in PFRS 3 and PFRS
51% to 100% Consolidation
subsidiary 10
Recognize own
assets, liabilities,
revenue, and
PFRS 11 and expenses plus
Joint operation other relevant share in the assets,
Contractually
Joint control PFRSs liabilities,
agreed
revenues, and
expenses of the
joint operation
PFRS 11 and PAS
Joint venture Equity method
28
 Define Joint arrangements and enumerate its characteristics
 Sharing of capital and technology, and human resources, risk and reward under a
shared control.
 A joint arrangement is a contractual agreement wherein two or more parties have
joint control.
 The parties are either called operators or venturers depending on the legal
arrangement undertaken by them
 The following must also be present:
a. The parties are bound by a contractual agreement
b. The contractual agreement gives two or more of the parties joint control of the
arrangement
 It does not form part of the regular operation of the parties involved in the
arrangement.
 Define control and joint control
 It defines control as the power over the investee.

 Power carries with it the existing right to direct the relevant activities of the investee
—operating, financing, and investing.
 Three attributes of control: 1) power 2) exposure or rights to variable return, and 3)
the ability to use this power to affect investor’s returns
 Joint control – contractually agreed of sharing of control by two or more parties

involved which exists only when decision regarding relevant activities can be
undertaken with the unanimous consent of the parties sharing control.
 Illustrate sole control, collective control and joint control
A B C Agreement for Control Is there Joint

Control?
70% 15% 5% 70% None
50% 40% 10% 75% Yes
70% 25% 25% 75% None
*First line is sole control

*Second line is Joint control
*Third line is collective control, to be a joint arrangement, the parties would need to
specify which combination of the parties is required to agree unanimously on decisions
about the relevant activities of the arrangement.
Joint arrangement pwedeng marami pero dapat atleast 2 sa kanila may joint control.
Does not necessarily need that all participants have joint control.
 Enumerate the types of joint arrangement, discuss each on how to identify
1. 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.
2. 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. These parties are
called joint venturers.
The classification depends upon the rights and obligations of the parties of the
arrangement. An entity determines the type of joint arrangement in which it is involved by
considering:
a. The structure and legal form of the arrangement

b. Terms of the contractual agreement
c. Other facts and circumstances
 Assessment of Rights and Obligations
 Separate vehicle – a separately identifiable financial structure, including separate

legal entities or entities recognized by statute, regardless of whether those entities
have a legal personality.
 Held in separate vehicle – either joint venture or joint operation
 Not structured through a separate vehicle – joint operation
 Example of Joint Venture
 “The different parts of the product may be manufactured by each of the operators.
Each one bears its own costs and takes a share of the revenues from the sale of the
product depending on contractual agreement.”
 Examples of Joint operation
 “The operation of the subdivision will also be under the management of a separate
legal entity set up by the venturers.”
 Record transactions in the books of the venturers using equity method

 Record transactions in the books of the joint venture
 Record transactions using the title Joint Operation to determine profit or loss
 Be able to track down accountability or equity of each joint operator

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JOINT ARRANGEMENTS

 Define Joint arrangements and enumerate its characteristics

 Define control and joint control

 It defines control as the power over the investee.

 Joint control – contractually agreed of sharing of control by two or more parties

 Illustrate sole control, collective control and joint control

A B C Agreement for Control Is there Joint

*First line is sole control

 Enumerate the types of joint arrangement, discuss each on how to identify

a. The structure and legal form of the arrangement

 Assessment of Rights and Obligations

 Separate vehicle – a separately identifiable financial structure, including separate

 Held in separate vehicle – either joint venture or joint operation

 Not structured through a separate vehicle – joint operation

 Example of Joint Venture

 Examples of Joint operation

 Record transactions in the books of the venturers using equity method

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