Indian Accounting Standard (Ind AS) 111, Joint Arrangements, Important Material
Ind AS 111: Joint Arrangements
Ind AS-111 prescribes the accounting for a joint arrangement.
Joint arrangements are economic arrangement between two or more parties sharing joint control and make the decision jointly about the business activities. The purpose of the joint arrangement might be share costs or might be motivated by profit.
The investor will be required to either apply the equity method of accounting or recognize, on a line-by-line basis, its share of the underlying assets, liabilities, revenues and expenses. The accounting treatment required will depend on the substance of the arrangement and the nature of the investor’s interest in it.
A joint arrangement is an arrangement of which two or more parties have joint control and have the following characteristics:
- The parties are bound by a contractual arrangement; and
- It gives two or more of the parties joint control of the arrangement.
The objective of this Indian Accounting Standard (Ind AS) is to establish principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (i.e. joint arrangements). For the purpose of meeting the above stated objective, this Ind AS defines joint control and requires an entity that is a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and to account for those rights and obligations in accordance with that type of joint arrangement.
This Ind AS shall be applied by all entities that are a party to a joint arrangement.