-
8/7/2019 AS-27ppt
1/24
Accounting Standard - 27
FINANCIAL REPORTING OFINTERESTS IN JOINT VENTURES
CAMehul hahB. Com, F.C.A., DISA (ICA).
# : 2510 0861; 2510 9990
Email : [email protected]
-
8/7/2019 AS-27ppt
2/24
Scope
Applicable in accounting for interests in joint ventures and
the reporting of joint venture assets, liabilities, income and
expenses n o ven urers an nves ors, regar ess o estructures or forms under which the joint venture activities
take place.
Applicable whether independent or consolidated FSpresented by the venturer.
-
8/7/2019 AS-27ppt
3/24
Definitions
A joint venture is a contractual arrangement whereby two ormore parties undertake an economic activity, which is subjectto joint control.
Joint control is the contractually agreed sharing of controlover an economic activity.
Control is the power to govern the financial and operatingpolicies of an economic activity so as to obtain benefits fromit.
A venturer is a party to a joint venture and has joint control
over that joint venture.
-
8/7/2019 AS-27ppt
4/24
Definitions
An investor in a joint venture is a party to a jointventure and does not have joint control over thatjoint venture.
Proportionate consolidation is a method ofaccounting and reporting whereby a venturer's shareof each of the assets, liabilities, income and
expenses of a jointly controlled entity is reported asseparate line items in the venturer's financialstatements.
-
8/7/2019 AS-27ppt
5/24
Forms Of Joint Ventures
Jointly controlled operations
Jointly controlled assets
Jointly controlled entities.
-
8/7/2019 AS-27ppt
6/24
Characteristics common to all JVs
Parties bound by Contractual arrangement;
Contractual arrangement establishes jointcontrol.
Contractual Arrangement
(Binding)
Joint Control
Joint Venture
AS-23
-
8/7/2019 AS-27ppt
7/24
Contractual Arrangement
Evidences of C. A.
contract between the venturers
articles or other by-laws of the joint venture.
Contents of C. A.
Activity, duration and reporting obligations of the joint venture; Appointment of the board of directors or equivalent governing body of
the joint venture and the voting rights of the venturers;
Capital contributions by the venturers; and
sharing by the venturers of the output, income, expenses or results ofthe joint venture.
-
8/7/2019 AS-27ppt
8/24
Jointly Controlled Operations -Accounting Treatment
Interests in jointly controlled operations recognized in
separate FS and CFS below:
ssets t at t contro s an t e a t es t at t ncurs;
Expenses that it incurs and its share of the income that it earns from
the joint venture.
-
8/7/2019 AS-27ppt
9/24
Jointly Controlled Assets
Acquisition of Common Asset for JV
Each venturer may take a share of the output from the assets
and
bears an agreed share of the expenses incurred.
-
8/7/2019 AS-27ppt
10/24
Jointly Controlled Assets - Accounting
share of the jointly controlled assets, classified according to thenature of the assets;
any liabilities which it has incurred;
its share of any liabilities incurred jointly with the other venturersin relation to the joint venture;
any income from the sale or use of its share of the output of thejoint venture, together with its share of any expenses incurred by
the joint venture; and
any expenses which it has incurred in respect of its interest in thejoint venture.
-
8/7/2019 AS-27ppt
11/24
Jointly Controlled Entities
Establishment of a corporation, partnership or other
entity in which each venturer has an interest.
CA between the venturers establishes joint control
Jointly controlled entity has its own assets, liabilities,
income, and expenses
Independent Existence
and status
-
8/7/2019 AS-27ppt
12/24
Jointly Controlled Entities
Separate Financial Statements of a VenturerInterest accounted as per AS 13 (Now AS 30)
AS 28 (impairment) to be applied if necessary
CFS of a venturerInterest accounted on proportionate consolidation except:
interest acquired with a view to its subsequent disposal
in the near future; and
JV operates under severe long-term restrictions that
significantly impair its ability to transfer funds to theventurer. Use AS 13 (Now AS 30)
-
8/7/2019 AS-27ppt
13/24
CFS - Jointly Controlled Entities
Reflects the substance and economic reality
of the arrangement, rather than the joint
' .
Use proportionate consolidation method
show assets, liabilities, income, andexpenses as a separate line items on
realizable values.
-
8/7/2019 AS-27ppt
14/24
CFS - Difference in Reporting dates
Jointly controlled entity prepares statements as atthe same date as that of the venturer.
If impracticable to do this, FS drawn up to differentreporting dates may be used provided the differencein reporting dates is not more than six months.
Adjustments made for the effects of significanttransactions or other events that occur between thedate of FS Follow Consistency Common policies
-
8/7/2019 AS-27ppt
15/24
CFS
inappropriate to:
offset any assets or liabilities by the deduction of
Offset income or expenses by deduction from
other income or expense
Unless legally permissible
-
8/7/2019 AS-27ppt
16/24
CFS
excess of the cost to the venturer of its
interest in a jointly controlled entity over its
entity Goodwill
vice-versa Capital Reserve
-
8/7/2019 AS-27ppt
17/24
Discontinuance Of Joint Control
Discontinue the use of proportionate consolidation from the
entity but retains, either in whole or in part, its interest in theentity; or
Where the jointly controlled entity operates under severelong-term restrictions that significantly impair its ability to
transfer funds to the venturer.
Use AS 21, 23, or 30 as applicable
-
8/7/2019 AS-27ppt
18/24
Accounting Treatment After Discontinuance - Contd.
Cost of the investment should be determined as under:
The venturers share in the net assets of the ointly controlled
entity as at the date of discontinuance of proportionateconsolidation should be ascertained, and
The amount of net assets so ascertained should be adjusted
with the carrying amount of the relevant goodwill/capital
reserve as at the date of discontinuance of proportionate
consolidation.
-
8/7/2019 AS-27ppt
19/24
Transactions Between A VenturerAnd Joint Venture -
Only for CFS
Sale of Asset to JV
recognize only gain or loss which is attributable to the interests of the otherventurers
recognise full amount of loss when the contribution or sale provides evidence ofa reduction in the net realisable value of current assets or an impairment loss.
Purchases assets from JV
Not recognise its share of the profits of JV on the asset sold
Recognise its share of losses resulting from these transactions when they
represent a reduction in the net realisable value of current assets or animpairment loss.
-
8/7/2019 AS-27ppt
20/24
Transactions Between Venturer AndJoint Venture- Contd.
In case of separate FS of the venturer, the full amount of gain
or oss on e ransac ons s recogn se .
In case of consolidated financial statements, the venturer
recognises only that share of the unrealised gain or loss
which pertains to the interests of other venturers.
-
8/7/2019 AS-27ppt
21/24
Reporting Interests In Joint Ventures InThe FS of An Investor
An investor in JV having no joint control - report its
interest in a JV in its CFS as per AS 13 (now AS 30)
,
In separate FS of an investor, the interests in joint
ventures accounted for in accordance with
Accounting Standard 13 (now AS 30)
-
8/7/2019 AS-27ppt
22/24
Accounting Treatment In The FinancialStatements Of Operators
Operators or managers of a JV - account for any fees in
accordance with AS 9, Revenue Recognition.
-
8/7/2019 AS-27ppt
23/24
Disclosure Requirements
Aggregate amount of contingent liabilities, unless the
probability of loss is remote, separately from the amount of
other contingent liabilities
Its share of the contingent liabilities of the joint ventures
themselves for which it is contingently liable; and
Those contingent liabilities that arise because the venturer is
contingently liable for the liabilities of the other venturers of a
joint venture.
-
8/7/2019 AS-27ppt
24/24
. Disclosure Requirements
Any capital commitments of the venturer in relation to its interests in JVand its share in the capital commitments that have been incurred jointly withother venturers; and
Its share of the capital commitments of the joint ventures themselves.
A list of all joint ventures and description of interests in significant jointventures. In respect of jointly controlled entities, also disclose the proportion
of ownership interest, name and country of incorporation or residence.
In its separate financial statements, the aggregate amounts of each of theassets, liabilities, income and expenses related to its interests in the jointlycontrolled entities.
