IFRS 11 — Joint Arrangements
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Overview
IFRS 11 Joint Arrangements outlines the accounting by entities that jointly control an arrange-
ment. Joint control involves the contractually agreed sharing of control and arrangements
subject to joint control are classified as either a joint venture (representing a share of net assets
and equity accounted) or a joint operation (representing rights to assets and obligations for lia-
bilities, accounted for accordingly).
IFRS 11 was issued in May 2011 and applies to annual reporting periods beginning on or after 1
January 2013.
History of IFRS 11
Date Development Comments
November 2004 Project on joint arrangements added to the History of the project
IASB's agenda
13 September 2007 Exposure Draft ED 9 Joint Arrange- Comment deadline 11
ments published January 2008
12 May 2011 IFRS 11 Joint Arrangements issued Effective for annual
periods beginning on or
after 1 January 2013
28 June 2012 Amended by Consolidated Financial State- Effective for annual
ments, Joint Arrangements and Disclosure of periods beginning on or
Interests in Other Entities: Transition after 1 January 2013
Guidance
6 May 2014 Amended by Accounting for Acquisitions of Effective for annual
Interests in Joint Operations (Amendments periods beginning on or
to IFRS 11) after 1 January 2016
12 December 2017 Amended by Annual Improvements to IFRS Effective for annual
Standards 2015–2017 Cycle. periods beginning on or
after 1 January 2019.
Related Interpretations
o IFRS 11 superseded SIC-13 Jointly Controlled Entities - Non-Monetary Contributions
by Venturers
Amendments under consideration by the IASB
o Post-implementation review — IFRS 10, IFRS 11, and IFRS 12
Publications and resources
o IFRS in Focus Newsletter IASB issues new standard on joint arrangements summaris-
ing the requirements of IFRS 11 (PDF 69k, May 2011)
o Deloitte IFRS Podcast (May 2011, 10 minutes, 7mb)
o Effect analysis for IFRS 11 (link to IASB website)
Summary of IFRS 11
Core principle
The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint
arrangement in which it is involved by assessing its rights and obligations and accounts for
those rights and obligations in accordance with that type of joint arrangement. [IFRS 11:1-2]
Key definitions
[IFRS 11:Appendix A]
Joint arrangement
An arrangement of which two or more parties have joint control
Joint control
The contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require the unanimous consent of the parties
sharing control
Joint operation
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
Joint
venture
A joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the arrangement
Joint venturer
A party to a joint venture that has joint control of that joint venture
Party to a joint
An entity that participates in a joint arrangement, regardless of whether that entity has
joint control of the arrangement
Separate vehic
A separately identifiable financial structure, including separate legal entities or entities
recognised by statute, regardless of whether those entities have a legal personality
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control.
[IFRS 11:4]
A joint arrangement has the following characteristics: [IFRS 11:5]
o the parties are bound by a contractual arrangement, and
o the contractual arrangement gives two or more of those parties joint control of the
arrangement.
A joint arrangement is either a joint operation or a joint venture. [IFRS 11:6]
Joint control
Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of the parties
sharing control. [IFRS 11:7]
Before assessing whether an entity has joint control over an arrangement, an entity first
assesses whether the parties, or a group of the parties, control the arrangement (in accordance
with the definition of control in IFRS 10 Consolidated Financial Statements). [IFRS 11:B5]
After concluding that all the parties, or a group of the parties, control the arrangement collec-
tively, an entity shall assess whether it has joint control of the arrangement. Joint control exists
only when decisions about the relevant activities require the unanimous consent of the parties
that collectively control the arrangement. [IFRS 11:B6]
The requirement for unanimous consent means that any party with joint control of the arrange-
ment can prevent any of the other parties, or a group of the parties, from making unilateral
decisions (about the relevant activities) without its consent. [IFRS 11:B9]
Types of joint arrangements
Joint arrangements are either joint operations or joint ventures:
o A 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. [IFRS 11:15]
o A 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. Those parties are
called joint venturers. [IFRS 11:16]
Classifying joint arrangements
The classification of a joint arrangement as a joint operation or a joint venture depends upon the
rights and obligations of the parties to the arrangement. An entity determines the type of joint
arrangement in which it is involved by considering the structure and form of the arrangement,
the terms agreed by the parties in the contractual arrangement and other facts and circum-
stances. [IFRS 11:6, IFRS 11:14, IFRS 11:17]
Regardless of the purpose, structure or form of the arrangement, the classification of joint
arrangements depends upon the parties' rights and obligations arising from the arrangement.
[IFRS 11:B14; IFRS 11:B15]
A joint arrangement in which the assets and liabilities relating to the arrangement are held in a
separate vehicle can be either a joint venture or a joint operation. [IFRS 11:B19]
A joint arrangement that is not structured through a separate vehicle is a joint operation. In such
cases, the contractual arrangement establishes the parties' rights to the assets, and obligations
for the liabilities, relating to the arrangement, and the parties' rights to the corresponding
revenues and obligations for the corresponding expenses. [IFRS 11:B16]
Financial statements of parties to a joint arrangement
Joint operations
A joint operator recognises in relation to its interest in a joint operation: [IFRS 11:20]
o its assets, including its share of any assets held jointly;
o its liabilities, including its share of any liabilities incurred jointly;
o its revenue from the sale of its share of the output of the joint operation;
o its share of the revenue from the sale of the output by the joint operation; and
o its expenses, including its share of any expenses incurred jointly.
A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involve-
ment in a joint operation in accordance with the relevant IFRSs. [IFRS 11:21]
The acquirer of an interest in a joint operation in which the activity constitutes a business, as
defined in IFRS 3 Business Combinations, is required to apply all of the principles on business
combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that
conflict with the guidance in IFRS 11. [IFRS 11:21A] These requirements apply both to the initial
acquisition of an interest in a joint operation, and the acquisition of an additional interest in a
joint operation (in the latter case, previously held interests are not remeasured). [IFRS 11:B33C]
Note: The requirements above were introduced by Accounting for Acquisitions of Interests in Joint Operations, which applies
to annual periods beginning on or after 1 January 2016 on a prospective basis to acquisitions of interests in joint operations
occurring from the beginning of the first period in which the amendments are applied.
A party that participates in, but does not have joint control of, a joint operation shall also account
for its interest in the arrangement in accordance with the above if that party has rights to the
assets, and obligations for the liabilities, relating to the joint operation. [IFRS 11:23]
Joint ventures
A joint venturer recognises its interest in a joint venture as an investment and shall account for
that investment using the equity method in accordance with IAS 28 Investments in Associates
and Joint Ventures unless the entity is exempted from applying the equity method as specified
in that standard. [IFRS 11:24]
A party that participates in, but does not have joint control of, a joint venture accounts for its
interest in the arrangement in accordance with IFRS 9 Financial Instruments unless it has signif-
icant influence over the joint venture, in which case it accounts for it in accordance with IAS
28 (as amended in 2011). [IFRS 11:25]
Separate Financial Statements
The accounting for joint arrangements in an entity's separate financial statements depends on
the involvement of the entity in that joint arrangement and the type of the joint arrangement:
o If the entity is a joint operator or joint venturer it shall account for its interest in
o a joint operation in accordance with paragraphs 20-22;
o a joint venture in accordance with paragraph 10 of IAS 27 Separate
Financial Statements. [IFRS 11:26]
o If the entity is a party that participates in, but does not have joint control of, a joint
arrangement shall account for its interest in:
o a joint operation in accordance with paragraphs 23;
o a joint venture in accordance with IFRS 9, unless the entity has signifi-
cant influence over the joint venture, in which case it shall apply
paragraph 10 of IAS 27 (as amended in 2011). [IFRS 11:27]
Disclosure
There are no disclosures specified in IFRS 11. Instead, IFRS 12 Disclosure of Interests in Other
Entities outlines the disclosures required.
Applicability and early adoption
Note: This section has been updated to reflect the amendments to IFRS 11 made in June 2012.
IFRS 11 is applicable to annual reporting periods beginning on or after 1 January 2013.
[IFRS 11:Appendix C1]
When IFRS 11 is first applied, an entity need only present the quantitative information required
by paragraph 28(f) of IAS 8 for the annual period immediately preceding the first annual period
for which the standard is applied [IFRS 11:C1B]
Special transitional provisions are included for: [IFRS 11.Appendix C2-C13]
o transition from proportionate consolidation to the equity method for joint ventures
o transition from the equity method to accounting for assets and liabilities for joint opera-
tions
o transition in an entity's separate financial statements for a joint operation previously
accounted for as an investment at cost.
In general terms, the special transitional adjustments are required to be applied at the beginning
of the immediately preceding period (rather than the the beginning of the earliest period
presented). However, an entity may choose to present adjusted comparative information for
earlier reporting periods, and must clearly identify any unadjusted comparative information and
explain the basis on which the comparative information has been prepared [IFRS 11.C12A-
C12B].
An entity may apply IFRS 11 to an earlier accounting period, but if doing so it must disclose the
fact that is has early adopted the standard and also apply: [IFRS 11.Appendix C1]
o IFRS 10 Consolidated Financial Statements
o IFRS 12 Disclosure of Interests in Other Entities
o IAS 27 Separate Financial Statements (as amended in 2011)
o IAS 28 Investments in Associates and Joint Ventures (as amended in 2011).
