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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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Jointly Controlled
Assets
18. Some joint
ventures involve the joint control, and often the joint
ownership, by the venturers of one or more assets contributed
to, or acquired for the purpose of, the joint venture and
dedicated to the purposes of the joint venture. The assets are
used to obtain benefits for the venturers. Each venturer may
take a share of the output from the assets and each bears an
agreed share of the expenses incurred.
19. These joint
ventures do not involve the establishment of a corporation,
partnership or other entity, or a financial structure that is
separate from the venturers themselves. Each venturer has
control over its share of future economic benefits through its
share of the jointly controlled asset.
20. Many activities
in the oil, gas and mineral extraction industries involve
jointly controlled assets. For example, a number of oil
production companies may jointly control and operate an oil
pipeline. Each venturer uses the pipeline to transport its own
product in return for which it bears an agreed proportion of
the expenses of operating the pipeline. Another example of a
jointly controlled asset is when two entities jointly control
a property, each taking a share of the rents received and
bearing a share of the expenses.
21. In respect of
its interest in jointly controlled assets, a venturer shall
recognise in its financial statements:
(a) its share of the
jointly controlled assets, classified according to
the nature of the assets;
(b) any liabilities
that it has incurred;
(c) its share of any
liabilities incurred jointly with the other venturers
in relation to the joint venture;
(d) any income from
the sale or use of its share of the output of the
joint venture, together with its share of any expenses
incurred by the joint venture; and
(e) any expenses
that it has incurred in respect of its interest in
the
joint venture.
22. In respect of
its interest in jointly controlled assets, each venturer
includes in its accounting records and recognises in its
financial statements:
(a) its share of the
jointly controlled assets, classified according to the nature
of the assets rather than as an investment. For example, a
share of a jointly controlled oil pipeline is classified as
property, plant and equipment.
(b) any liabilities
that it has incurred, for example those incurred in financing
its share of the assets.
(c) its share of any
liabilities incurred jointly with other venturers in relation
to the joint venture.
(d) any income from
the sale or use of its share of the output of the joint
venture, together with its share of any expenses incurred by
the joint venture.
(e) any expenses
that it has incurred in respect of its interest in the joint
venture, for example those related to financing the venturer’s
interest in the assets and selling its share of the output.
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.
23. The treatment of
jointly controlled assets reflects the substance and economic
reality and, usually, the legal form of the joint venture.
Separate accounting records for the joint venture itself may
be limited to those expenses incurred in common by the
venturers and ultimately borne by the venturers according to
their agreed shares. Financial statements may not be prepared
for the joint venture, although the venturers may prepare
management accounts so that they may assess the performance of
the joint venture.
Jointly Controlled
Entities
24. A jointly
controlled entity is a joint venture that involves the
establishment of a corporation, partnership or other entity in
which each venturer has an interest. The entity operates in
the same way as other entities, except that a contractual
arrangement between the venturers establishes joint control
over the economic activity of the entity.
25. A jointly
controlled entity controls the assets of the joint venture,
incurs liabilities and expenses and earns income. It may enter
into contracts in its own name and raise finance for the
purposes of the joint venture activity. Each venturer is
entitled to a share of the profits of the jointly controlled
entity, although some jointly controlled entities also involve
a sharing of the output of the joint venture.
26. A common example
of a jointly controlled entity is when two entities combine
their activities in a particular line of business by
transferring the relevant assets and liabilities into a
jointly controlled entity. Another example is when an entity
commences a business in a foreign country in conjunction with
the government or other agency in that country, by
establishing a separate entity that is jointly controlled by
the entity and the government or agency.
27. Many jointly
controlled entities are similar in substance to those joint
ventures referred to as jointly controlled operations or
jointly controlled assets. For example, the venturers may
transfer a jointly controlled asset, such as an oil pipeline,
into a jointly controlled entity, for tax or other reasons.
Similarly, the venturers may contribute into a jointly
controlled entity assets that will be operated jointly. Some
jointly controlled operations also involve the establishment
of a jointly controlled entity to deal with particular aspects
of the activity, for example, the design, marketing,
distribution or after-sales service of the product.
28. A jointly
controlled entity maintains its own accounting records and
prepares and presents financial statements in the same way as
other entities in conformity with International Financial
Reporting Standards.
29. Each venturer
usually contributes cash or other resources to the jointly
controlled entity. These contributions are included in the
accounting records of the venturer and recognised in its
financial statements as an investment in the jointly
controlled entity.
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