|
The IASB issued an Exposure Draft on Joint Arrangements (ED9) in September 2007.
One of the IASB’s objectives of the project was to amend IAS 31 Interests in Joint Ventures, by removing the option of proportionate consolidation for jointly controlled entities, the main difference between US GAAP and IAS 31, and requiring an entity to account for its interests in joint ventures using the equity method.
On February 2008 EFRAG issued its comment letter on the ED in which it was not supportive to eliminate the proportionate consolidation while it suggested that a better approach might have been to limit the choice available under IAS 31.
On May 2011 the IASB issued IFRS 11 Joint Arrangements. IFRS 11 supersedes IAS 31 and SIC-13 Jointly Controlled Entities—Non-Monetary Contributions by Venturers and it is effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted so long as IFRS 10, IFRS 12, IAS 27(2011) and IAS 28 (2011) are adopted at the same time.
IFRS 11 mainly addresses two aspects of IAS 31: a) the structure of the arrangement was the only determinant of the accounting and, b) that an entity had a choice of accounting treatment for interests in jointly controlled entities.
The key features of IFRS 11 are as follows:
• Changes in the definitions have reduced the ‘types’ of joint arrangements to two: joint operations and joint ventures. In a joint operation the parties that have joint control have rights to the assets and obligations for the liabilities. In a Joint venture the parties that have joint control have rights to the net assets of the arrangements;
• The policy choice in IAS 31 of proportionate consolidation for jointly controlled entities has been eliminated while equity accounting has been made mandatory for participants in joint ventures; and
• Entities that participate in joint operations are required to recognise their share of the assets,liabilities,revenues and expenses in accordance with applicable IFRS.
In autumn 2011, EFRAG in partnership with European National Standard Setters conducted a field-test of the new requirements introduced by IFRS 11 and IFRS 12 Disclosure of Interests in Other Entities in relation to interests in joint arrangements. The questionnaire used for field testing can be accessed below. The feedback report from the field-test will be published in the due course.
On 9 February 2012, EFRAG issued the Invitation to Comment on its Initial Assessments of: IFRS 10, IFRS 11, IFRS 12, IAS 27 (2011) and IAS 28 (2011). Comments are requested by 11 March 2012. For further information and to access EFRAG's draft endorsement advice on IFRS 11, please click here.
Click here
to access the IASB project page.
|
