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