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Commission Regulation
(EC) No 2238/2004 of 29 December 2004 amending
Regulation (EC) No 1725/2003 adopting certain
international accounting standards in accordance with
Regulation (EC) No 1606/2002 of the European Parliament
and of the Council, as regards IASs IFRS 1, IASs Nos 1
to 10, 12 to 17, 19 to 24, 27 to 38, 40 and 41 and SIC
Nos 1 to 7, 11 to 14, 18 to 27 and 30 to 33
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Forms of Joint
Venture
7. Joint ventures
take many different forms and structures. This Standard
identifies three broad types—jointly controlled operations,
jointly controlled assets and jointly controlled entities—that
are commonly described as, and meet the definition of, joint
ventures. The following characteristics are common to all
joint ventures:
(a) two or more
venturers are bound by a contractual arrangement; and
(b) the contractual
arrangement establishes joint control.
Joint Control
8. Joint control may
be precluded when an investee is in legal reorganisation or in
bankruptcy, or operates under severe long-term restrictions on
its ability to transfer funds to the venturer. If joint
control is continuing, these events are not enough in
themselves to justify not accounting for joint ventures in
accordance with this Standard.
Contractual
Arrangement
9. The existence of
a contractual arrangement distinguishes interests that involve
joint control from investments in associates in which the
investor has significant influence (see IAS 28). Activities
that have no contractual arrangement to establish joint
control are not joint ventures for the purposes of this
Standard.
10. The contractual
arrangement may be evidenced in a number of ways, for example
by a contract between the venturers or minutes of discussions
between the venturers. In some cases, the arrangement is
incorporated in the articles or other by-laws of the joint
venture. Whatever its form, the contractual arrangement is
usually in writing and deals with such matters as:
(a) the activity,
duration and reporting obligations of the joint venture;
(b) the appointment
of the board of directors or equivalent governing body of the
joint venture and the voting rights of the venturers;
(c) capital
contributions by the venturers; and
(d) the sharing by
the venturers of the output, income, expenses or results of
the joint venture.
11. The contractual arrangement
establishes joint control over the joint venture. Such a
requirement ensures that no single venturer is in a
position to control the activity unilaterally.
12. The contractual
arrangement may identify one venturer as the operator or
manager of the joint venture. The operator does not control
the joint venture but acts within the financial and operating
policies that have been agreed by the venturers in accordance
with the contractual arrangement and delegated to the operator.
If the operator has the power to govern the financial and
operating policies of the economic activity, it controls the
venture and the venture is a subsidiary of the operator and
not a joint venture.
Jointly Controlled
Operations
13. The operation of
some joint ventures involves the use of the assets and other
resources of the venturers rather than the establishment of a
corporation, partnership or other entity, or a financial
structure that is separate from the venturers themselves. Each
venturer uses its own property, plant and equipment and
carries its own inventories. It also incurs its own expenses
and liabilities and raises its own finance, which represent
its own obligations. The joint venture activities may be
carried out by the venturer’s employees alongside the
venturer’s similar activities. The joint venture agreement
usually provides a means by which the revenue from the sale of
the joint product and any expenses incurred in common are
shared among the venturers.
14. An example of a
jointly controlled operation is when two or more venturers
combine their operations, resources and expertise to
manufacture, market and distribute jointly a particular
product, such as an aircraft. Different parts of the
manufacturing process are carried out by each of the venturers.
Each venturer bears its own costs and takes a share of the
revenue from the sale of the aircraft, such share being
determined in accordance with the contractual arrangement.
15. In respect of
its interests in jointly controlled operations, a venturer
shall recognise in its financial statements:
(a) the assets that
it controls and the liabilities that it incurs; and
(b) the expenses
that it incurs and its share of the income that it
earns
from the sale of goods or services by the joint venture.
16. Because the
assets, liabilities, income and expenses are recognised in the
financial statements of the venturer, no adjustments or other
consolidation procedures are required in respect of these
items when the venturer presents consolidated financial
statements.
17. Separate
accounting records may not be required for the joint venture
itself and financial statements may not be prepared for the
joint venture. However, the venturers may prepare management
accounts so that they may assess the performance of the joint
venture.
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