The joint arrangement: an agreement with shared control

Learning objectives

• Explain that a joint arrangement is an arrangement of which two or more parties have joint control, and that the sharing of control is established by a contractual arrangement.L1
• Identify, from the facts of a case, whether an arrangement is a joint arrangement as defined by the Standard.L1, L2

Normative references

• IFRS 11Appendix A definitions: a joint arrangement is an arrangement of which two or more parties have joint control; joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control; a joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement; a joint venture is a joint arrangement whereby those parties have rights to the net assets; the joint operator and the joint venturer are the parties that have joint control of the joint operation and of the joint venture respectively; a party to a joint arrangement is an entity that participates in it, regardless of whether it has joint control; a separate vehicle is a separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether they have a legal personality.

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

5 questions

• Two companies each hold half of the capital of the same entity; this equal holding is enough to make the situation a joint arrangement under IFRS 11.L1
• What characterises a joint arrangement under IFRS 11?L1
• Which statements about the notion of a joint arrangement are correct? More than one answer is possible.L2
• Saturne SA is a party, with another company, to a joint arrangement structured through a separate vehicle. Its management argues, to classify it as a joint operation, that the arrangement was designed to supply it with the output, that it needs that output and that it has bought it for several years. No clause or fact gives it enforceable rights to the assets or legal or constructive obligations for the vehicle's liabilities (case facts). What is concluded in light of the Interpretations Committee's 2014-2015 decision?L3
• The conclusion of the 2022 post-implementation review that the requirements of IFRS 11 are working as intended is neither a rule nor an amendment of the standard.L2