Transactions with the joint operation: limited gain

Learning objectives

• Calculate the gain recognised by a joint operator on the sale of an asset to the joint operation, limited to the other parties' interests.L2, L3
• Record the sale of an asset by the joint operator to its joint operation with a partial gain.L3

Normative references

• IFRS 11 §22The accounting for transactions between an entity and a joint operation in which it is a joint operator (sale, contribution or purchase of assets) is specified in the application guidance: a gain or loss on a sale or contribution is recognised only to the extent of the other parties' interests (B34), and losses that provide evidence of a reduction in net realisable value or of an impairment are recognised in full (B35); for a purchase, the share of the gain or loss is recognised only when the assets are resold to a third party (B36), and the share of losses that provide evidence of a reduction in value is recognised (B37).
• IFRS 11 §B34Guidance on transactions with the joint operation: the gain or loss on the sale or contribution of assets to the joint operation is recognised only to the extent of the other parties' interests.

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

3 questions

• Orca SA, a joint operator, sells an item of equipment to the joint operation that it runs with other parties. The total gain on the sale is {total_gain_on_sale}. The other parties' interests in the joint operation represent {other_parties_percent} (case data). Calculate the gain recognised by Orca and the gain that is not recognised.L3
• A colleague writes: "Orca, a joint operator, sells an item of equipment to the joint operation at a gain of 150,000; it recognises the whole gain, since the sale is made with an entity separate from itself." What is the error in this reasoning?L2
• In July 2016 the Interpretations Committee noted a tension between the limitation of gain to the other parties' interests (IFRS 11, B34 and B35) and the accounting for loss of control in IFRS 10. What is the status of the corresponding amendments to IFRS 10 and IAS 28?L3