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Joint Arrangements
Objective
  • The objective of this Indian Accounting Standard (Ind AS) is to establish principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (ie joint arrangements).

Meeting the objective

To meet the objective in paragraph 1, this Ind AS defines joint control and requires an entity that is a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and to account for those rights and obligations in accordance with that type of joint arrangement.

Scope

This Ind AS shall be applied by all entities that are a party to a joint arrangement.

Joint arrangements
  • A joint arrangement is an arrangement of which two or more parties have joint control.
  • A joint arrangement has the following characteristics:
  • The parties are bound by a contractual arrangement (see paragraphs B2–B4).
  # This Ind AS was notified vide G.S.R. 111(E) dated 16th February, 2015 and was amended vide Notification No. G.S.R. 274(E) dated 30th March, 2019 and G.S.R. 419(E) dated 18th June, 2021.
  • The contractual arrangement gives two or more of those parties joint control of the arrangement (see paragraphs 7–13).
A joint arrangement is either a joint operation or a joint venture.
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.

  1. An entity that is a party to an arrangement shall assess whether the contractual arrangement gives all the parties, or a group of the parties, control of the arrangement collectively. All the parties, or a group of the parties, control the arrangement collectively when they must act together to direct the activities that significantly affect the returns of the arrangement (ie the relevant activities).
  2. Once it has been determined that all the parties, or a group of the parties, control the arrangement collectively, joint control exists only when decisions about the relevant activities require the unanimous consent of the parties that control the arrangement collectively.
  3. In a joint arrangement, no single party controls the arrangement on its own. A party with joint control of an arrangement can prevent any of the other parties, or a group of the parties, from controlling the arrangement.
  4. An arrangement can be a joint arrangement even though not all of its parties have joint control of the arrangement. This Ind AS distinguishes between parties that have joint control of a joint arrangement (joint operators or joint venturers) and parties that participate in, but do not have joint control of, a joint arrangement.
  5. An entity will need to apply judgement when assessing whether all the parties, or a group of the parties, have joint control of an arrangement. An entity shall make this assessment by considering all facts and circumstances (see paragraphs B5–B11).
  6. If facts and circumstances change, an entity shall reassess whether it still has joint control of the arrangement.
Investment entity status
When a parent determines that it is an investment entity in accordance with paragraph 27 of Ind AS 110, the investment entity shall disclose information about significant judgements and assumptions it has made in determining that it is an investment entity. If the investment entity does not have one or more of the typical characteristics of an investment entity (see paragraph 28 of Ind AS 110), it shall disclose its reasons for concluding that it is nevertheless an investment entity.
9B When an entity becomes, or ceases to be, an investment entity, it shall disclose the change of investment entity status and the reasons for the change. In addition, an entity that becomes an   investment entity shall disclose the effect of the change of status on the financial statements for the period presented, including:
  1. the total fair value, as of the date of change of status, of the subsidiaries that cease to be consolidated;
  2. the total gain or loss, if any, calculated in accordance with paragraph B101 of Ind AS 110; and
  3. the line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately).
Types of joint arrangement
  • An entity shall determine the type of joint arrangement in which it is involved. 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.
  • 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.
  • 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.
  1. An entity applies judgement when assessing whether a joint arrangement is a joint operation or a joint venture. An entity shall determine the type of joint arrangement in which it is involved by considering its rights and obligations arising from the arrangement. An entity assesses its rights and obligations by considering the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances (see paragraphs B12–B33).
  2. Sometimes the parties are bound by a framework agreement that sets up the general contractual terms for undertaking one or more activities. The framework agreement might set out that the parties establish different joint arrangements to deal with specific activities that form part of the agreement. Even though those joint arrangements are related to the same framework agreement, their type might be different if the parties’ rights and obligations differ when undertaking the different activities dealt with in the framework agreement. Consequently, joint operations and joint ventures can coexist when the parties undertake different activities that form part of the same framework agreement.
  3. If facts and circumstances change, an entity shall reassess whether the type of joint arrangement in which it is involved has changed.
Financial statements of parties to a joint arrangement
Joint operations
  • A joint operator shall recognise in relation to its interest in a joint operation:
  • its assets, including its share of any assets held jointly;
  • its liabilities, including its share of any liabilities incurred jointly;
  • its revenue from the sale of its share of the output arising from the joint operation;
  • its share of the revenue from the sale of the output by the joint operation; and
  • its expenses, including its share of any expenses incurred jointly.
  1. A joint operator shall account for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the Ind ASs applicable to the particular assets, liabilities, revenues and expenses.
21A 1When an entity acquires an interest in a joint operation in which the activity of the joint operation constitutes a business, as defined in Ind AS 103, Business Combinations, it shall apply, to the extent of its share in accordance with paragraph 20, all of the principles on business combinations accounting in Ind AS 103, and other Ind ASs, that do not conflict with the guidance in this Ind AS and disclose the information that is required in those Ind ASs in relation to business combinations. This applies to the acquisition of both the initial interest and additional interests in a joint operation in which the activity of the joint operation constitutes a business. The accounting for the acquisition of an interest in such a joint operation is specified in paragraphs B33A–B33D.
  1. The accounting for transactions such as the sale, contribution or purchase of assets between an entity and a joint operation in which it is a joint operator is specified in paragraphs B34–B37.
1 Editorial correction notified vide Notification No. G.S.R. 419(E) dated 18th June, 2021.
  1. 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 paragraphs 20–22 if that party has rights to the assets, and obligations for the liabilities, relating to the joint operation. If a party that participates in, but does not have joint control of, a joint operation does not have rights to the assets, and obligations for the liabilities, relating to that joint operation, it shall account for its interest in the joint operation in accordance with the Ind ASs applicable to that interest.
Joint ventures
  • A joint venturer shall recognise its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with Ind AS 28, Investments in Associates and Joint Ventures, unless the entity is exempted from applying the equity method as specified in that standard.
A party that participates in, but does not have joint control of, a joint venture shall account for its interest in the arrangement in accordance with Ind AS 109, Financial Instruments, unless it has significant influence over the joint venture, in which case it shall account for it in accordance with Ind AS 28.
Separate financial statements
  • In its separate financial statements, a joint operator or joint venturer shall account for its interest in:
  • a joint operation in accordance with paragraphs 20–22;
  • a joint venture in accordance with paragraph 10 of Ind AS 27, Separate Financial Statements.
  • In its separate financial statements, a party that participates in, but does not have joint control of, a joint arrangement shall account for its interest in:
  • a joint operation in accordance with paragraph 23;
  • a joint venture in accordance with Ind AS 109, unless the entity has significant influence over the joint venture, in which case it shall apply paragraph 10 of Ind AS 27.
 
Appendix A

Defined terms

This appendix is an integral part of the Ind AS.

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 operator A party to a joint operation that has joint

control of that joint operation.

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 arrangement

An entity that participates in a joint arrangement, regardless of whether that entity has joint control of the arrangement.

separate vehicle A separately identifiable financial structure,

including separate legal entities or entities recognised by statute, regardless of whether those entities have a legal personality.

The following terms are defined in Ind AS 27, Ind AS 28 or Ind AS 110, Consolidated Financial Statements, and are used in this Ind AS with the meanings specified in those Ind ASs:

  • control of an investee
  • equity method
  • power
  • protective rights
  • relevant activities
  • separate financial statements
  • significant influence.

 

Appendix B
Application guidance

This appendix is an integral part of the Ind AS. It describes the application of paragraphs 1–27 and has the same authority as the other parts of this Ind AS.

B1 The examples in this appendix portray hypothetical situations. Although some aspects of the examples may be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern would need to be evaluated when applying Ind AS 111.

Joint arrangements
Contractual arrangement (paragraph 5)

Contractual arrangements can be evidenced in several ways. An enforceable contractual arrangement is often, but not always, in writing, usually in the form of a contract or documented discussions between the parties. Statutory mechanisms can also create enforceable arrangements, either on their own or in conjunction with contracts between the parties.

B3   When joint arrangements are structured through a separate vehicle (see paragraphs B19–B33), the contractual arrangement, or some aspects of the contractual arrangement, will in some cases be incorporated in the articles, charter or by-laws of the separate vehicle.

B4 The contractual arrangement sets out the terms upon which the parties participate in the activity that is the subject of the arrangement. The contractual arrangement generally deals with such matters as:

  1. the purpose, activity and duration of the joint arrangement.
  2. how the members of the board of directors, or equivalent governing body, of the joint arrangement, are appointed.
  3. the decision-making process: the matters requiring decisions from the parties, the voting rights of the parties and the required level of support for those matters. The decision-making process reflected in the contractual arrangement establishes joint control of the arrangement (see paragraphs B5–B11).
  1. the capital or other contributions required of the parties.
  2. how the parties share assets, liabilities, revenues, expenses or profit or loss relating to the joint arrangement.
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