iGAAP Alert: May 2011
IASB issues new standard on joint arrangements
IFRS 11 does not amend the concept of the joint control but provides a new classification of joint arrangements, as well as new accounting requirements.
Parties’ rights and obligations become a basis for classification of whether the joint arrangement is a joint operation or a joint venture, rather than the existence of a separate entity. The two new types of joint arrangements are:
- joint operations – when parties have separately rights to the assets and obligations for the liabilities; and
- joint ventures – when parties have rights to the net assets of the arrangement.
Accounting for interests in joint arrangements has also been changed:
- interests in joint operations – a joint operator recognises its share of the assets, liabilities, revenues and expenses; and
- interests in joint ventures – the equity method of accounting is the only allowed method for a joint venturer. The proportionate consolidation method has been eliminated.