IFRS 11, Joint Arrangements, is an International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB). It provides guidance on how to account for and report on joint arrangements, which are arrangements in which two or more entities jointly control an economic activity.
There are two types of joint arrangements: joint ventures and joint operations. Joint ventures are arrangements in which the parties that have joint control of the economic activity have rights to the net assets of the joint arrangement. Joint operations are arrangements in which the parties that have joint control of the economic activity do not have rights to the net assets of the joint arrangement.
IFRS 11 requires entities to classify their joint arrangements as either joint ventures or joint operations based on the rights and obligations of the parties involved. It also provides guidance on how to account for and report on joint ventures and joint operations.
For joint ventures, IFRS 11 requires entities to use the equity method of accounting, which involves recognizing their share of the joint venture’s profits or losses in their own financial statements. For joint operations, IFRS 11 requires entities to recognize their share of the joint operation’s revenues and expenses in their own financial statements.
If you have any questions about IFRS 11 or how to apply it, you may want to seek the advice of a professional with expertise in financial reporting.
What does IFRS 11 discuss?
About. IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (joint arrangements). A joint arrangement is an arrangement of which two or more parties have joint control.
What is the scope of IFRS 11?
IFRS 11 applies to all entities that are a party to a joint arrangement. There was previously a scope exemption in IAS 31 relating to venture capital organizations and mutual funds and unit trusts [IAS 31.1]. Such entities are not excluded from the scope of IFRS 11 but are eligible for a measurement exemption.
What is the difference between joint venture and joint operation?
The key distinction between a joint operation and a joint venture is that a joint venturer has rights to the net assets of a joint venture. In contrast, for a joint operation, the parties that have joint control over the arrangement have rights to the assets, and obligations for the liabilities, of the arrangement.
What are joint arrangements?
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the agreed sharing of control of an arrangement by way of a binding arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
How do you account for a joint venture?
A joint venture account is credited and a bank account or debtor account is debited in case of either cash sale or credit sale. Each co-venturer debits joint venture account and credits personal accounts of other co-venturer on the account of either goods purchased or expensed by other co-venturers.