International Accounting Standard 31

1. International Accounting Standard 31 Interests in Joint Ventures Prepared by Mosbah Majzoub, CPA

2. IAS 31,Interests in Joint Ventures • Objectives • Definitions • Forms of Joint Ventures • Jointly Controlled Operations • Jointly Controlled Assets • Jointly Controlled Entities • Disclosure Prepared by Mosbah Majzoub, CPA

3. IAS 31,Interests in Joint VenturesDefinitions • A Joint Venture is a contractual arrangement whereby two or more parties undertake an economic activity • Control is the power to govern the financial and operating policies of an economic activity so as to obtain benefits from it • Joint control is the contractually agreed sharing of control over an economic activity Prepared by Mosbah Majzoub, CPA

4. IAS 31,Interests in Joint VenturesForms of Joint Venture • IAS identifies three broad types: • Jointly Controlled Operations • Jointly Controlled Assets • Jointly Controlled Entities Prepared by Mosbah Majzoub, CPA

5. IAS 31,Interests in Joint VenturesJointly Controlled Operations • Description Two or More ventures combine their operations, resources and expertise in order to manufacture, market and distribute jointly a particular product. Prepared by Mosbah Majzoub, CPA

6. IAS 31,Interests in Joint VenturesJointly Controlled Operations • Presentation and Accounting • A venturer should recognise in its separate financial statements: • The assets that it controls and the liabilities that it incurs; and • The expenses that it incurs and its share of the income that it earns from the sales of goods or services by the joint venture. Example 1 Prepared by Mosbah Majzoub, CPA

7. IAS 31,Interests in Joint VenturesJointly Controlled Assets • Description • This type of joint venture involves the joint control and ownership of one or more assets contributed to the purposes of the joint venture. • Each venturer may take a share of the output from the assets and each bears an agreed share of the expenses incurred. Prepared by Mosbah Majzoub, CPA

8. IAS 31,Interests in Joint VenturesJointly Controlled Assets • Description • These joint ventures do not involve the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the ventures themselves, example: pipelines. Prepared by Mosbah Majzoub, CPA

9. IAS 31,Interests in Joint VenturesJointly Controlled Assets • Presentation and Accounting Each venturer should include the following items in its accounting records: • Its share of the jointly controlled assets • Any liabilities which it has incurred on behalf of the joint venture • Its share of income, together with its share of any expenses incurred by the joint venture Prepared by Mosbah Majzoub, CPA

10. IAS 31,Interests in Joint VenturesJointly Controlled Entities • Description • This is a joint venture, which involves the establishment of a corporation, partnership or other entity in which each venturer has an interest Prepared by Mosbah Majzoub, CPA

11. IAS 31,Interests in Joint VenturesJointly Controlled Entities • Description • A jointly controlled entity controls the assets of the joint venture, incurs liabilities and expenses and earns income. It may enter into contracts in its own name and raise finance for the purposes of the joint venture activity. Prepared by Mosbah Majzoub, CPA

12. IAS 31,Interests in Joint VenturesJointly Controlled Entities • Description • A jointly controlled entity maintains its own accounting records and prepares and presents financial statements (e.g. under IFRS) in the same way as other entities. Prepared by Mosbah Majzoub, CPA

13. IAS 31,Interests in Joint VenturesJointly Controlled Entities • Presentation and Accounting • A venturer shall recognise its interest in a jointly controlled entity using either proportionate consolidation or the equity method. Example 2 Prepared by Mosbah Majzoub, CPA

14. IAS 31,Interests in Joint VenturesJointly Controlled Entities • Transactions between venturer and a joint venture When a venturer sells assets to a joint venture, the venturer recognizes only that portion of the gain or loss that is attributable to the interests of the other ventures. Example 3 Prepared by Mosbah Majzoub, CPA

15. IAS 31,Interests in Joint VenturesJointly Controlled Entities • SIC-13: Jointly Controlled Entities-Non-Monetary Contributions by Ventures • A joint venturer may contribute non-monetary assets to a jointly-controlled entity in exchange for an equity interest in the jointly-controlled entity. • The issue is when should a joint venture recognise the appropriate portion of any gains or losses resulting from a contribution in its income statement. Prepared by Mosbah Majzoub, CPA

16. IAS 31,Interests in Joint VenturesDisclosure • Contingencies • A venturer should disclose the aggregate amount of the contingent liabilities, unless the probability of loss is remote, separately from the amount of other contingent liabilities. • A venturer discloses the aggregate amount of any capital commitments in respect of its interests in joint ventures separately from other commitments Prepared by Mosbah Majzoub, CPA

17. IAS 31,Interests in Joint VenturesDisclosure • Interests A venturer should list and describe interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities. Prepared by Mosbah Majzoub, CPA

18. IAS 31,Interests in Joint VenturesDisclosure • Interests A venturer which reports its interests in jointly controlled entities using the line by line reporting format for proportionate consolidation or the equity method should disclose the aggregate amounts of each of: • Current assets • Long term assets • Current liabilities • Long term liabilities • Income and expenses related to its interests in joint ventures. Example 4 Prepared by Mosbah Majzoub, CPA

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