JOINT ARRANGEMENTS

It is defined in the International Financial Reporting Standard (IFRS) 11 – Joint

Arrangement as an arrangement of two (2) or more parties having joint control.

It is a separately identifiable financial structure, including separate legal entities. It may be in the form of a corporation.

Despite the diverse forms and structures, all joint arrangements have two (2) characteristics in common:

The contractual agreement sets out the terms upon which parties participate in the activities subject to the agreement. It generally specifies the following:

• Purpose, activity, and duration of the joint arrangement

• Appointment of members of the board of directors

• Capital or other contributions requirements

• Sharing of assets, liabilities, revenues, expenses, or profit or loss of the joint arrangement

• Nature of the activities subject to the agreement and how to undertake them

It is the contractually agreed sharing of control of an arrangement. It exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

There are two (2) structures of joint arrangement:

This joint arrangement is a joint operation. In such a case, the contractual arrangement establishes the parties’ rights to the assets and liabilities relating to the arrangement and the parties’ rights to the corresponding revenues and obligations for the corresponding expenses.

This joint arrangement can either be a joint venture or a joint operation. Whether a party is a joint operator or joint venture depends on his/her right to the assets, obligations, and liabilities, relating to the arrangement held in the separate vehicle.

Whether a party is a joint operator or joint venture depends on his/her right to the assets, obligations, and liabilities, relating to the arrangement held in the separate vehicle. The following factors shall be considered: LOC

It determines whether it gives the parties rights to net assets (joint venture) or rights to the assets and obligations for the liabilities of arrangement (joint operation).