Library / Technical Accounting Manual: IFRS, IAS and Ind AS Equivalents

IFRS 11 - Joint Arrangements

Indian equivalent: Ind AS 111 - Joint Arrangements

Objective and scope

IFRS 11 governs arrangements where two or more parties share *joint control of an activity, and classifies each as either a joint operation or a joint venture* - which then determines how each party accounts for its interest.

Core principle

When partners run something together under joint control (unanimous consent for key decisions), the accounting depends on what they share. IFRS 11 splits them: a joint operation (share the actual assets and liabilities) vs a joint venture (share only the net result, via the equity method).

Defined terms and technical terminology

Term	Technical meaning
Joint arrangement	An arrangement of which two or more parties have joint control.
Joint control	Contractually agreed sharing of control, where decisions about the relevant activities require the unanimous consent of the sharing parties.
Joint operation	A joint arrangement where the parties have rights to the assets and obligations for the liabilities - each recognises its share of assets/liabilities/revenue/expenses.
Joint venture	A joint arrangement where the parties have rights to the net assets - accounted using the equity method (IAS 28).

Application and worked illustrations

Joint control first, then classification

IFRS 11 applies only where there is joint control - the unanimous consent of the sharing parties is needed for the relevant activities. If one party can decide alone, it's not joint control (that's IFRS 10). Once joint control exists, classify the arrangement by the rights and obligations of the parties: rights to the individual assets and liabilities → joint operation; rights only to the net assets → joint venture. A separate legal entity often signals a joint venture, but the legal form, contract terms and other facts must all be assessed.

Worked example 1 - joint operation

Two oil companies jointly own and operate a pipeline, each entitled to use half its capacity and each liable for half the costs. This is a joint operation. Each company records its share of the pipeline (asset), its share of the liabilities, and its share of revenues and expenses directly in its own accounts - line by line.

Worked example 2 - joint venture

Two companies form a separate incorporated entity, JV Ltd, with 50:50 joint control, sharing only its profits (not the underlying assets). This is a joint venture. Each partner uses the equity method: records the investment at cost, then adjusts for its 50% share of JV Ltd's profits, losses and dividends (as under IAS 28) - it does not pick up individual assets and liabilities.

Journal entry - Joint venturer - share of JV profit (equity method)
Account	Debit (₹)	Credit (₹)
Investment in joint venture	xx
Share of profit of JV (P&L)		xx

Common mistake: proportionately consolidating a joint venture. IFRS 11 removed proportionate consolidation - joint ventures use the equity method only.

IND AS LINK

Ind AS 111 aligns with IFRS 11 - joint operations recognise the share of assets/liabilities; joint ventures use the equity method (with Ind AS 28).

Further worked illustrations

Extra numeric example - a joint operation's shares

Two companies jointly build and run a toll road, sharing 50:50 the assets, costs and toll revenue. As a joint operation, each partner records in its own books: 50% of the road (asset), 50% of the construction loan (liability), 50% of toll revenue, and 50% of operating costs - line by line - rather than a single investment figure.

INDIAN REGULATORY CONTEXT

Indian roads, ports and power projects are often built through special-purpose vehicles jointly controlled by partners. Whether each partner recognises its share of assets/liabilities (joint operation) or a single equity-method investment (joint venture) depends on the rights the contract gives - a determination with big balance-sheet consequences under Ind AS 111.

TECHNICAL EDGE CASE

Two arrangements can both use a separate legal entity yet be classified differently. If the contract obliges the partners to buy all the output and fund all the liabilities of the entity (so cash flows pass straight through to them), it's a joint operation despite the separate entity. If the partners have rights only to the entity's net assets, it's a joint venture. The legal shell alone doesn't decide it - the substance of the rights and obligations does.