IFRS 11

Joint Arrangements

1Objective and scope

IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (joint control) by two or more parties. It classifies each joint arrangement as either a joint operation or a joint venture, and specifies the accounting for each type.

2Key definitions

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 in which the parties (joint operators) have rights to the assets and obligations for the liabilities relating to the arrangement.

Joint venture

A joint arrangement in which the parties (joint venturers) have rights to the net assets of the arrangement.

3Classifying and accounting for the arrangement

Classification is determined by assessing the parties' rights and obligations arising from the arrangement, considering its structure, legal form, the terms agreed by the parties in their contract, and, where relevant, other facts and circumstances. An arrangement structured through a separate vehicle (e.g. a separate incorporated company) is not automatically a joint venture just because it has its own legal identity - if the legal form, contractual terms, or other facts give the parties direct rights to the assets and obligations for the liabilities, it is still a joint operation.

Classification	Accounting treatment for a joint operator / venturer
Joint operation	Recognise its own share of the assets, liabilities, revenue and expenses of the joint operation directly, line by line, in its own financial statements (and, where relevant, its consolidated financial statements)
Joint venture	Account for its interest using the equity method under IAS 28 - proportionate consolidation is not permitted

4Presentation and disclosure

The nature, extent and financial effects of its interests in joint arrangements
Significant judgements made in determining that it has joint control of an arrangement, and in classifying the arrangement as a joint operation or a joint venture

5Examinable focus

What KASNEB tests

Classifying an arrangement as a joint operation or a joint venture from scenario facts describing its legal form, contractual terms and the parties' rights to assets vs net assets, and then applying the correct accounting (line-by-line vs equity method), is the recurring question type, usually paired with IAS 28.