Joint Ventures

Where are we in the project?

At the April 2008 Board Meeting the staff presented a summary of the comment letters received in response to the Exposure Draft ED 9 Joint Arrangements. There are differences in how many respondents have assessed the likely effect of the proposals in ED9 and how the Board assessed the implications. On that basis, many respondents disagreed with the removal of the proportionate consolidation method.

The Board asked the staff to contact some of the respondents to gain a better understanding of whether their concerns reflect problems with the wording of the ED or a more fundamental concern with the technical decisions underpinning the proposals.

The staff is currently contacting respondents that participated in the Invitation to Comment on the Exposure Draft. This exercise is assisting the staff to identify how the wording might need to be further clarified in the final IFRS. The staff is planning to bring the results of those enquiries and the areas of the ED where modifications or additional clarification are considered needed and highlight how this is expected to affect the final standard at the October 2008 Board Meeting. Application Guidance and Examples will be provided and presented to the Board by the end of the year.

Next due process step

The Board currently expects to publish a final standard in the second quarter of 2009.

Estimated project completion

An IFRS, IFRS X Joint Arrangements, is expected to be published in the second quarter of 2009.

Why are we undertaking this project?

IAS 31 Interests in Joint Ventures sets out the requirements for the accounting for interests in joint ventures. IAS 31 defines a joint venture as a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
The main focus of the project has been to address the two aspects of IAS 31 that the Board considers are an impediment to high quality reporting of joint arrangement activities.

1) IAS 31 uses the form of the arrangement as the primary determinant of the accounting, which does not always reflect the underlying rights and obligations agreed to by the parties.
2) IAS 31 gives an entity a choice of accounting treatment for interests in jointly controlled entities, which makes it difficult to compare financial reports.

Project objective

The objective of the project is to improve the accounting for, and the quality of the information being reported about, what the proposed IFRS defines as joint arrangements—which include joint ventures, joint assets and joint operations.

Project history/Due process steps completed

Working and Advisory Groups

This project is being conducted by the IASB only. The Board has not reconsidered all of the requirements in IAS 31 therefore a working group was not considered necessary for this project.