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Chapter 30Chapter 30
Joint Venture Joint Venture
ArrangementsArrangements
Chapter 30Chapter 30
Joint Venture Joint Venture
ArrangementsArrangements
Lecture TopicsLecture Topics
• Structures and characteristics• Accounting for joint ventures• Compatibility with international accounting
standards• Disclosure
Lecture ReferencesLecture References
• Text - Chapter 30• AASB - 1006
Key ConceptsKey Concepts
• Joint venture• Management agreement• Shared control• Agency• Good faith• Joint tenancy
Structures and CharacteristicsStructures and Characteristics
• The insignificance of names• Major common characteristics
– Joint venture agreement– Management agreement– Number of participants– Contributions– Finite life
Structures and CharacteristicsStructures and Characteristics
• Shared control• The structures
– Partnership joint ventures• Agency• Good faith• Joint tenancy
– Incorporated joint ventures
Structures and CharacteristicsStructures and Characteristics
• The structures– Joint venture operations
• Liability• Fiduciary obligations• Joint venture assets
Joint Ventures
Joint VentureEntities
Joint VentureOperations
Joint VenturerPartnership
Other Joint VentureEntities
Structures and CharacteristicsStructures and Characteristics
• Distinguishing the structures– Status– Impermanence– In common– Separate ventures– Profit sharing
Structures and CharacteristicsStructures and Characteristics
• Distinguishing the structures– Product sharing– Business undertaking– Special purpose entities
Structures and CharacteristicsStructures and Characteristics
• Review of joint venture operations– Definition problems– Flexibility– Taxation
Accounting for Joint VenturesAccounting for Joint Ventures
• Incorporated and partnership structures– The venture– The venturers
• Each reports own interest• One-line mode• Off-balance problems
Accounting for Joint VenturesAccounting for Joint Ventures
• Accounting for joint venture operations– Accounting records
• Contribution received• Costs incurred• Production output• Assets and liabilities held
Accounting for Joint VenturesAccounting for Joint Ventures
• Accounting for joint venture operations– Disclosure
• Joint venture operations• Joint venture entities• General• AASB 1040 disclosures
Accounting for Joint VenturesAccounting for Joint Ventures
• Accounting for joint venture operations– Line-by-line method
• Each venturer takes a/c of its share of each venture asset, cost and liability for which there is shared responsibility
Accounting for Joint VenturesAccounting for Joint Ventures
• Application of methods to a production joint venture– Determination of:
• Cost of assets• Amounts to charge for asset use/consumption
Accounting for Joint VenturesAccounting for Joint Ventures
• Transactions between venturers– Assets transferred at fair value– Profit/loss if different to carrying value in
contributor’s books• Compatibility with IAS 31
Joint Ventures
JointlyControlledOperations
JointlyControlled
Assets
JointlyControlled
Entities
Venturers
Investors
Venturers’ own and consolidatedaccounts - cost method
Venturers’ own and consolidatedaccounts - line by line method
Other ConsiderationsOther Considerations
• Service contributions• Non-monetary assets• Contribution not proportional to share of
costs and output• Liquidity
Where to get more informationWhere to get more information
• Other courses• List books, articles, electronic sources