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Thread: 19 -Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

  1. #11
    IND-AS
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    Thumbs up Equity method of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    Equity method of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Equity method

    38. As an alternative to proportionate consolidation described in paragraph 30, a venturer shall recognise its interest in a jointly controlled entity using the equity method.

    39. A venturer recognises its interest in a jointly controlled entity using the equity method irrespective of whether it also has investments in subsidiaries or whether it describes its financial statements as consolidated financial statements.

    40. Some venturers recognise their interests in jointly controlled entities using the equity method, as described in Ind AS 28. The use of the equity method is supported by those who argue that it is inappropriat e to combine controlled items with jointly controlled items and by those who believe that venturers have significant influence, rather than joint control, in a jointly controlled entity. This Standard does not recommend the use of the equity method because proportionate consolidation better reflects the substance and economic reality of a venturer’s interest in a jointly controlled entity, that is to say, control over the venturer’s share of the future economic benefits. Nevertheless, this Standard permits the use of the equity method, as an alternative treatment, when recognising interests in jointly controlled entities.

    41. A venturer shall discontinue the use of the equity method from the date on which it ceases to have joint control over, or have significant influence in, a jointly controlled entity.



  2. #12
    IND-AS
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    Thumbs up Exceptions to proportionate consolidation and equity method of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Exceptions to proportionate consolidation and equity method of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Exceptions to proportionate consolidation and equity method

    42. Interests in jointly controlled entities that are classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations shall be accounted for in accordance with that Indian Accounting Standard.

    43. When an interest in a jointly controlled entity previously classified as held for sale no longer meets the criteria to be so classified, it shall be ac counted for using proportionate consolidation or the equity method as from the date of its classification as held for sale. Financial statements for the periods since classification as held for sale shall be amended accordingly.

    44. [Refer to Appendix 1]

    45. When an investor ceases to have joint control over an entity, it shall account for any remaining investment in accordance with Ind AS 39 from that date, provided that the former jointly controlled entity does not become a subsidiary or associate. From the date when a jointly controlled entity becomes a subsidiary of an investor, the investor shall account for its interest in accordance with Ind AS 27 and Ind AS 103 Business Combinations. From the date when a jointly controlled entity becomes an associate of an investor, the investor shall account for its interest in accordance with Ind AS 28. On the loss of joint control, the investor shall measure at fair value any investment the investor retains in the former jointly controlled entity. The investor shall recognise in profit or loss any difference between:

    (a) the fair value of any retained investment and any proceeds from disposing of the part interest in the jointly controlled entity; and
    (b) the carrying amount of the investment at the date when joint control is lost.

    45A. When an investment ceases to be a jointly controlled entity and is accounted for in accordance with Ind AS 39, the fair value of the investment when it ceases to be a jointly controlled entity shall be regarded as its fair value on initial recognition as a financial asset in accordance with Ind AS 39 .

    45B. If an investor loses joint control of an entity, the investor shall account for all amounts recognised in other comprehensive income in relation to that entity on the same basis as would be required if the jointly controlled entity had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the investor reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the investor loses joint control of the entity. For example, if a jointly controlled entity has available-for-sale financial assets and the investor loses joint control of the entity, the investor shall reclassify to profit or loss the gain or loss previously recognised in other comprehensive income in relation to those assets. If an investor’s ownership interest in a jointly controlled entity is reduced, but the investment continues to be a jointly controlled entity, the investor shall reclassify to profit or loss only a proportionate amount of the gain or loss previously recognised in other comprehensive income.


  3. #13
    IND-AS
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    Thumbs up Separate financial statements of a venturer of Indian Accounting Standard (Ind AS) 31- Earlier Accounting standard - (27)- Interests in Joint Ventures

    Separate financial statements of a venturer of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Separate financial statements of a venturer

    46. An interest in a jointly controlled entity shall be accounted for in a venturer’s separate financial statements in accordance with paragraphs 38–43 of Ind AS 27.

    47. This Standard does not mandate which entities produce separate financial statements available for public use.


  4. #14
    IND-AS
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    Thumbs up Transactions between a venturer and a joint venture of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Transactions between a venturer and a joint venture of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Transactions between a venturer and a joint venture

    48. When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers. 1 The venturer shall recognise the full amount of any loss when the contribution or sale provides evidence of a reduction in the net realisable value of current assets or an impairment loss.

    49. When a venturer purchases assets from a joint venture, the venturer shall not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer shall recognise its share of the losses resulting from these transactions in the same way as profits except that losses shall be recognised immediately when they represent a reduction in the net realisable value of current assets or an impairment loss.

    50. To assess whether a transaction between a venturer and a joint venture provides evidence of impairment of an asset, the venturer determines the recoverable amount of the asset in accordance with Ind AS 36 Impairment of Assets. In determining value in use, the venturer estimates future cash flows from the asset on the basis of continuing use of the asset and its ultimate disposal by the joint venture.

    Note -

    1 See also Appendix A of this standard Jointly Controlled Entities—Non-Monetary Contributions by Venturers .

  5. #15
    IND-AS
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    Thumbs up Reporting interests in joint ventures in the financial statements of an investor of Indian Accounting Standard (Ind AS) 31

    Reporting interests in joint ventures in the financial statements of an investor of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures



    Reporting interests in joint ventures in the financial statements of an investor

    51. An investor in a joint venture that does not have joint control shall account for that investment in accordance with Ind AS 39 or, if it has significant influence in the joint venture, in accordance with Ind AS 28.


  6. #16
    IND-AS
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    Thumbs up Operators of joint ventures of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    Operators of joint ventures of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Operators of joint ventures

    52. Operators or managers of a joint venture shall account for any fees in accordance with Ind AS 18 Revenue.

    53. One or more venturers may act as the operator or manager of a joint venture. Operators are usually paid a management fee for such duties. The fees are accounted for by the joint venture as an expense.



  7. #17
    IND-AS
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    Thumbs up Disclosure of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    Disclosure of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures



    Disclosure

    54. A venturer shall disclose the aggregate amount of the following contingent liabilities, unless the probability of loss is remote, separately from the amount of other contingent liabilities:

    (a) any contingent liabilities that the venturer has incurred in relation to its interests in joint ventures and its share in each of the contingent liabilities that have been incurred jointly with other venturers;
    (b) its share of the contingent liabilities of the joint ventures themselves for which it is contingently liable ; and
    (c) those contingent liabilities that arise because the venturer is contingently liable for the liabilities of the other venturers of a joint venture.

    55. A venturer shall disclose the aggregate amount of the following commitments in respect of its interests in joint ventures separately from other commitments:

    (a) any capital commitments of the venturer in relation to its interests in joint ventures and its share in the capital commitments that have been incurred jointly with other venturers; and
    (b) its share of the capital commitments of the joint ventures themselves.

    56. A venturer shall disclose a listing and description of interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities. A venturer that recognises its interests in jointly controlled entities using the line-by-line reporting format for proportionate consolidation or the equity method shall disclose the aggregate amounts of each of current assets, long-term assets, current liabilities, long-term liabilities, income and expenses related to its interests in joint ventures.

    57. A venturer shall disclose the method it uses to recognise its interests in jointly controlled entities.


  8. #18
    IND-AS
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    Thumbs up APPENDIX - A of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    APPENDIX - A of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    APPENDIX - A


    Jointly Controlled Entities ––Non-Monetary Contributions by Venturers

    Issue

    1. Paragraph 48 of Ind AS 31 refers to both contributions and sales between a venturer and a joint venture as follows: ‘When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction’. In addition, paragraph 24 of Ind AS 31 says that ‘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’. There is no explicit guidance on the recognition of gains and losses resulting from contributions of non -monetary assets to jointly controlled entities (‘JCEs’).

    2. Contributions to a JCE are transfers of assets by venturers in exchange for an equity interest in the JCE. Such contributions may take various forms. Contributions may be made simultaneously by the venturers either upon establishing the JCE or subsequently. The consideration received by the venturer(s) in exchange for assets contributed to the JCE may also include cash or other consideration that does not depend on future cash flows of the JCE (‘additional consideration’).

    3 The issues are:

    (a) when the appropriate portion of gains or losses resulting fr om a contribution of a non-monetary asset to a JCE in exchange for an equity interest in the JCE should be recognised by the venturer in profit or loss;
    (b) how additional consideration should be accounted for by the venturer; and
    (c) how any unrealised gain or loss should be presented in the consolidated financial statements of the venturer.

    4. This Appendix deals with the venturer’s accounting for non -monetary contributions to a JCE in exchange for an equity interest in the JCE that is accounted for using either the equity method or proportionate consolidation.

    Accounting Principles

    5. In applying paragraph 48 of Ind AS 31 to non-monetary contributions to a JCE in exchange for an equity interest in the JCE, a venturer shall recognise in profit or loss for the period the portion of a gain or loss attributable to the equity interests of the other venturers except when:

    (a) the significant risks and rewards of ownership of the contributed non - monetary asset(s) have not been transferred to the JCE; or

    (b) the gain or loss on the non-monetary contribution cannot be measured reliably; or
    (c) the contribution transaction lacks commercial substance, as that term is described in Ind AS 16.

    If exception (a), (b) or (c) applies, the gain or loss is regarded a s unrealised and therefore is not recognised in profit or loss unless paragraph 6 also applies.

    6. If, in addition to receiving an equity interest in the JCE, a venturer receives monetary or non-monetary assets, an appropriate portion of gain or loss on the transaction shall be recognised by the venturer in profit or loss.

    7. Unrealised gains or losses on non-monetary assets contributed to JCEs shall be eliminated against the underlying assets under the proportionate consolidation method or against the investment under the equity method. Such unrealised gains or losses shall not be presented as deferred gains or losses in the venturer’s consolidated balance sheet.


  9. #19
    IND-AS
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    Thumbs up Appendix - B of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    Appendix - B of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Appendix - B


    References to matters contained in other Indian Accounting Standards


    This Appendix is an integral part of Indian Accounting Standard 31.

    1. Appendix A, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds contained in Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets makes reference to this Standard also.


  10. #20
    IND-AS
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    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27) - Interests in Joint Ventures

    Appendix - 1 of Indian Accounting Standard (Ind AS) 31 - Earlier Accounting standard - (27)

    Interests in Joint Ventures


    Appendix - 1

    Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this appendix is only to bring out the differences between Indian Accounting Standard (Ind AS) 31 and the corresponding International Accounting Standard (IAS) 31, Interests in Joint Ventures and SIC 13, Jointly Controlled Entities –– Non-Monetary Contributions by Venturers issued by the International Accounting Standards Board.

    Comparison with IAS 31, Interests in Joint Ventures

    1. The transitional provisions given in IAS 31 have not been given in Ind AS 31, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First -time Adoption of Indian Accounting Standards corresponding to IFRS 1, First -time Adoption of International Financial Reporting Standards.

    2. Different terminology is used, as used in existing laws e.g., the term ‘balance sheet’ is used instead of ‘Stastement of financial position’ and ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’.

    3. Paragraph 1(b) of IAS 31 has been deleted in Ind AS 31 as the Companies Act, 1956, is not applicable to mutual funds, unit trusts and similar entities including investment linked insurance funds and, thus, this standard would not be applicable to such entities. However, paragraph number 1(b) has been retained in Ind AS 31 to maintain consistency with IAS 31

    4. Sub-Paragraphs 2(b) and (c) and paragraph 6 have been deleted as the applicability or exemptions to the Indian Accounting Standards is governed by the Companies Act and the Rules made thereunder. However, paragraph number 6 has been retained in Ind AS 31 to maintain consistency with IAS 31.

    5. Paragraph 44 has been deleted by IASB. However, the paragraph number has been retained in Ind AS 31 to maintain consistency with IAS 31.


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