Joint arrangements ASPE 3056 IFRS 11

Question 1

A Joint Arrangement exists when two or more parties have Joint Control. What factors indicate that Joint Control exists?

Answer 1

ASPE 3056 and IFRS 11

• In order for joint control to exist, decision making must require unanimous consent of the parties that have the joint control
• Any party with joint control can prevent any of the other parties from making unilateral decisions without their consent
• Can be evidenced by the percentage of voting rights each party has as compared to the minimum proportion of voting rights required to make decisions
• Note that each party does not necessarily have to have the same percentage ownership

Question 2

Joint Arrangements are sub-divided into types: Joint Operations and Joint Ventures for IFRS and Jointly
Controlled Assets/Operation and Jointly Controlled Enterprises for ASPE.

What is the definition of each?

Answer 2

ASPE 3056 and IFRS 11

• This can be complex, but generally, Joint Operations (IFRS) and Jointly Controlled Assets/Operations (ASPE) will not be structured
  as a separate vehicle (e.g. a separate corporation).

‒ In these instances a contract between the parties governs the arrangement over some jointly controlled operation or assets.

Such arrangements are common in the oil and gas industry.

• Joint Ventures (IFRS) and Jointly Controlled Enterprises (ASPE) will involve a separate jointly controlled entity such as a jointly controlled corporation.

‒ This type of joint arrangement is the more common one outside of the oil and gas industry.

Question 3

How are the different types of Joint Arrangements
accounted for?

Answer 3

ASPE 3056

‒ Jointly controlled operations

‒ Include on B/S share of jointly controlled assets and liabilities; Include in I/S share of revenue
and expenses from operation

‒ Jointly controlled assets

‒ Account for specific asset(s) it controls, any liabilities incurred, and its share of revenues and
expenses from the arrangement

‒ Jointly controlled enterprises

‒ Can choose cost method or equity method (policy must be applied consistently)

IFRS 11

‒ Joint Operations

‒ Include on B/S share of jointly controlled assets and liabilities; Include in I/S share of revenue and
expenses from operation

‒ Joint Ventures

‒ Equity method

Question 4

Can a gain be recognized on a
contribution/sale to a joint venture
and over what time period? How
are losses on contribution to a
joint venture recognized?

Answer 4

IFRS 11 and ASPE 3056
* Yes, but only to the extent of the other non-related venturers’ interest
(full profit can only be recognized once the joint venture sells the asset)
e.g. If entity owns a 35% interest in a JV, only 65% of the gain can be
recognized.
* Losses on contributions to a joint venture are recognized in income
immediately to the extent of other venturer’s interest (entity’s interest
would also be written down if transaction provides evidence of
impairment)
* SIC 13 has specific conditions under which profit is not recognized on
non-monetary contributions to a joint venture (i.e. contribution of assets
in exchange for an equity interest) – look up if required