Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 18

INTERESTS IN JOINT VENTURES (IAS 31)

1. OBJECTIVE

1.1 This Standard sets out the requirements for accounting for interests in joint ventures regardless of the structure and legal form in which the joint venture activities are carried out.

1.2 This Standard is not applicable to venturers’ shares in jointly controlled entities that are held by

• Venture capital organizations or
• Mutual funds, unit trusts, and similar entities including investment-linked insurance funds that upon initial recognition are designated at fair value through profit and loss account or are classified as held for trading in accordance with International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement.

1.3 This Standard is replaced by International Financial Reporting Standard (IFRS) 11, Joint Arrangement (see Appendix B). The new Standard is applicable to annual reporting periods beginning on or after January 1, 2013, with an option of earlier adoption.

2. SYNOPSIS OF THE STANDARD

The summary of this Standard, which is widely used by venturers in conducting business, is listed next.

2.1 This Standard identifies the three types of joint ventures that are commonly described as, and meet the definition of, a joint venture:

1. Jointly controlled operations

2. Jointly controlled assets

3. Jointly controlled entities

2.1.1 A joint venture is a contractual arrangement whereby two or more parties (the “venturers”) undertake an economic activity that is subject to “joint ...