The terms of the contractual arrangement

Learning objectives

• Analyse how the terms of the contractual arrangement modify or confirm the rights and obligations suggested by the legal form.L2

Normative references

• IFRS 11 §B26In some cases, the parties use the contractual arrangement to reverse or modify the rights and obligations conferred by the legal form of the vehicle; in example 4, the partners of a company agree to each hold a share of the assets and to be liable for the liabilities in a specified proportion, which may make the arrangement a joint operation. According to B25, the contractual terms often coincide with the legal form.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Which statements about the role of the terms of the contractual arrangement in classification are correct? More than one answer is possible.L2
• Vega SA and Rigel SA have created Arion SA, a separate company whose legal form suggests rights to net assets. The contractual arrangement nevertheless provides that each party bears half of Arion's debts and receives half of its revenues and expenses (case facts). What is concluded about the role of the contractual terms?L2