ACCA SBR UK Syllabus C. Reporting The Financial Performance Of A Range Of Entities - Associates and joint ventures - Notes 23 / 24
Associates and joint ventures
Key differences between IAS 28 Investments in Associates and Joint ventures and IFRS 12 Disclosure of Interests in Other Entities on the one hand and FRS 102 Section 14 on the other are:
IAS 28 | FRS 102 Section 14 |
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IAS 28 covers both associates and joint ventures. | FRS 102 Section 14 focuses on associates. |
No implicit goodwill is recognised or amortised on acquisition of an interest in an associate or joint venture. | Implicit goodwill is recognised on acquisition of an interest in an associate or joint venture, being the difference between the consideration transferred and the investor's share of the fair value of the net assets. This amount is then amortised. |
IFRS 12 specifies disclosure requirements for interests in associates and joint ventures. | FRS 102 does not require such detailed information about the investee or about risks associated with the investment. |
There are also differences in the presentation of the associate or joint venture in the separate (individual) financial statements of the parent. These were covered earlier in paragraph 4.3.
Joint ventures in FRS 102 Section 15
Section 15 applies to accounting for joint ventures in both consolidated and individual financial statements.
Joint venture: A contractual arrangement to undertake an economic activity subject to joint control. (FRS 102 Section 15)
The FRS 102 classification of joint ventures differs from that in IFRS 11 Joint Arrangements. Joint ventures can take three forms:
Jointly controlled operations – similar to joint operations under IFRS 11. The venturer recognises the assets it controls and the liabilities and expenses it incurs, as well as its share of income earned.
Jointly controlled assets – no direct equivalent in IFRS 11. The venturer recognises its share of the joint assets, liabilities, income and expenses as well as any liabilities and expenses it controls directly.
Jointly controlled entities – similar to joint ventures under IFRS 11. It involves the establishment of a corporation, partnership or other entity in which each venturer has an interest.
An investor that is not a parent may account for investments in jointly controlled entities at cost less impairment, fair through other comprehensive income or fair value through profit or loss in its individual financial statements.
In consolidated accounts, an investor that is a parent must use the equity method to account for investments in jointly controlled entities.