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Afar-13 Notes - Joint Arrangements

There are two main types of joint arrangements: joint operations (JO) and joint ventures (JV). JO involve joint control where parties have rights to the assets and obligations for the liabilities relating to the arrangement. JV require the formation of a separate vehicle, where net assets and liabilities are pooled. To determine if an arrangement is a JO or JV, it is assessed if there is a separate vehicle - if not, it is a JO, and if there is, it could be either a JO or JV. For JO without separate books, the parties account for their share of income, expenses, assets and liabilities. The equity method is used to account for JVs

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Vincent Luigil Alcera
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73 views1 page

Afar-13 Notes - Joint Arrangements

There are two main types of joint arrangements: joint operations (JO) and joint ventures (JV). JO involve joint control where parties have rights to the assets and obligations for the liabilities relating to the arrangement. JV require the formation of a separate vehicle, where net assets and liabilities are pooled. To determine if an arrangement is a JO or JV, it is assessed if there is a separate vehicle - if not, it is a JO, and if there is, it could be either a JO or JV. For JO without separate books, the parties account for their share of income, expenses, assets and liabilities. The equity method is used to account for JVs

Uploaded by

Vincent Luigil Alcera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ADVANCED FINANCIAL ACCOUNTING AND REPORTING

AFAR-13 | JOINT ARRANGEMENTS

-
- JINT ARRANGEMENT

- JOINT CONTROL

- at least two parties must have joint control; not all


- case 2 & 3
= no joint control; only collective control
→ A & B can decide w/o C, and A & C can decide w/o B (case 2)
→ may opt for joint arrangement if unanimous decision is specific among parties
- TYPES OF JOINT ARRANGEMENTS

- JO (lol)
→ has separate rights on both assets and liab.
- JV
→ requires net amount for assets and liab
- HOWTO DETERMINE (IF JO OR JV)

- “separate vehicle” = separate entity

- no separate vehicle = JO
- has a separate vehicle = either JO or JV
- ACCOUNTING FOR JOINT OPERATIONS

- w/ books = same accounting procedure for partnerships


- w/o books → TBD
- e.g.,
→ Saturday revenue = distributed to weekday assignees equally
- problem solving

note: JO account
= debited for expenses incurred
= credited for income-related transactions
- note: profit/loss should be the same in each party

- JO debit = receivable
- JO credit = payable
- problem 1 (w/o separate books)

- note: they may choose not to have entries in the formation of a joint operation
- need to monitor simultaneously

- Dec. 1
- L is liable if ever the JO won’t continue

- problem II

- problem III

- problem IV

- problem V

- problem VI

- JOINT VENTURE

- apply equity method whether investment in associate or joint venture

- problem VII
JO or Inv. in Associate won’t matter; equity method prevails
- problem VIII

Alcera, Vincent Luigil C. | BSA 4-11


16/03/2023; hope I graduate on time :’]

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