Strategic Business Reporting (International) · Associates and joint arrangements

Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11)

Updated 11 October 2026 · Fact-checked

IFRS 11 splits joint arrangements into joint operations and joint ventures. In a joint operation, the parties have rights to assets and obligations for liabilities, so each records its own share line by line. In a joint venture, the parties have rights to net assets, so each uses the equity method under IAS 28.

Understand Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11)

A joint arrangement is an arrangement where two or more parties have joint control. Joint control means decisions about the relevant activities need the unanimous consent of the parties sharing control. If one party can decide alone, it is not joint control. Check this first.

IFRS 11 then asks one question: what do the parties get from the arrangement? The answer decides the accounting.

In a joint operation, the parties (joint operators) have rights to the assets and obligations for the liabilities. They account for their own assets, liabilities, revenue and expenses. In a joint venture, the parties (joint venturers) have rights to the net assets of the arrangement. They do not own the assets directly. They hold an investment.

Structure matters. If the arrangement is not set up through a separate vehicle, it is a joint operation. If it is set up through a separate vehicle (for example a company), you must look deeper. Check three things: the legal form of the vehicle, the terms of the contractual arrangement, and other facts and circumstances. A company normally gives its owners rights to net assets. But the contract can override this. For example, the parties may take substantially all the output and be liable for its debts. Then the arrangement is a joint operation despite the separate vehicle.

The accounting follows. A joint operator recognises its share of assets, liabilities, revenue and expenses under the relevant IFRS. A joint venturer uses the equity method from IAS 28, unless an exemption applies. The examiner often tests classification first, then the numbers.

Key rules to remember

Joint control test: Joint control = contractually agreed sharing of control + unanimous consent needed for relevant activities; If no single party can direct the relevant activities alone, and unanimous consent is required, joint control exists. Some parties may be involved without having joint control.
Joint operation accounting: Recognise: own assets + own liabilities + own share of jointly held items + own share of revenue + own expenses; Applies to the relevant IFRS for each item. Share is by the rights and obligations in the contract, not always by ownership percentage.
Joint venture accounting: Investment at cost + share of post-acquisition profit or loss and OCI − dividends received; This is the equity method under IAS 28. Show one line in the statement of financial position and one in profit or loss.
Joint operator sale or contribution of assets to the operation: Recognise gain or loss only to the extent of the other parties' interests; Applies when the operator sells or contributes assets to its own joint operation. Full gain is recognised only once the assets are sold on to a third party. A full loss is recognised immediately if the sale or contribution provides evidence of a reduction in net realisable value of current assets or an impairment loss on non-current assets.
Equity method: share of profit: Share of profit of JV = JV profit after tax × investor's %; Adjust first for fair value differences and unrealised profit on transactions with the JV.

How to solve Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11) questions

Use this order for any IFRS 11 question. Classification comes before any calculation.

1Check for joint control. Is there a contractual agreement, and does it need unanimous consent for the relevant activities? If not, IFRS 11 does not apply to that party.
2Check structure. If there is no separate vehicle, it is a joint operation. Stop here.
3If there is a separate vehicle, test its legal form. Does it give the parties rights to net assets, or direct rights to assets and obligations for liabilities?
4Read the contractual terms. Look for clauses giving parties rights to assets, liabilities for debts, or sharing of output.
5Consider other facts and circumstances. For example, if the parties take substantially all the output and the vehicle depends on them for cash flows, this points to a joint operation.
6State your conclusion and give reasons from the scenario. Then apply the accounting: line by line for a joint operation, equity method for a joint venture.
7Compute the amounts. Deal with any transactions between the investor and the arrangement, and adjust for fair values and unrealised profit.
8Add disclosure or judgement comments if the requirement asks for them.

Quickest way: Three-question classification

When to use it: Use when time is short and the requirement is mainly to classify and explain the treatment.

Q1: Is there unanimous consent? If no, it is not a joint arrangement.
Q2: Is there a separate vehicle? If no, it is a joint operation.
Q3: If yes, do the contract or the facts give the parties the assets and the liabilities, or only the net assets? Assets and liabilities means joint operation. Net assets means joint venture.
Write the treatment in one line: own share of each item, or equity method.
Quote one fact from the scenario to support each answer. This earns application marks.

Common mistakes in Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11)

Classifying as a joint venture just because a separate company exists.
Students treat legal form as the only test.
Fix: Always check the contractual terms and other facts. A company can still give the parties rights to assets and obligations for liabilities.
Using proportionate consolidation for a joint venture.
Old standards allowed it, and the line-by-line method feels familiar.
Fix: Joint ventures use the equity method only. Line-by-line treatment is for joint operations.
Recognising a share based on ownership percentage in a joint operation when the contract says otherwise.
Students assume share equals equity holding.
Fix: Use the share of assets, liabilities, revenue and expenses set out in the contract.
Treating a party without joint control as a joint venturer.
Students overlook that some parties may take part but lack joint control.
Fix: Test for joint control first. A party without it does not apply joint venture accounting. If it participates in a joint operation without joint control but has rights to assets and obligations for liabilities, it still accounts for its interest as a joint operator. Otherwise it applies IAS 28 if it has significant influence, or IFRS 9.
Recognising the full profit on a sale or contribution of an asset to a joint operation.
Students treat the joint operation as an outside buyer and forget that the operator keeps its own share of the asset.
Fix: Recognise only the portion of the gain relating to the other parties' interests, until the asset is sold outside. Recognise a loss in full straight away if the transaction shows an impairment or a fall in net realisable value.
Writing a conclusion without using the scenario facts.
Students recite the rule from memory.
Fix: Link each test to a specific fact, then conclude. The marks are for application.

Worked examples

Example 1

Alpha and Beta set up Gamma, a separate company, each owning 50%. Decisions on Gamma's operations need both parties' approval. The contract states that Alpha takes 60% of Gamma's output and Beta takes 40%, at a price covering Gamma's costs, and Gamma has no other buyers. Alpha and Beta are liable for Gamma's liabilities in the same 60:40 proportions, and the contract gives them rights to Gamma's plant in those proportions. Gamma's total annual production costs are ₹80,00,000. Gamma's plant has a carrying amount of ₹1,00,00,000 and it has a loan of ₹40,00,000. Classify Gamma in Alpha's financial statements and explain the treatment.

Show the solution

Joint control: both parties must approve decisions, so there is joint control and Gamma is a joint arrangement.
Structure: Gamma is a separate vehicle, so legal form must be considered.
Legal form: a company would normally give rights to net assets, pointing to a joint venture.
Contract and facts: the parties take all the output and pay a price covering costs. Gamma depends on them for cash flows to settle its liabilities. The contract also gives them rights to the plant and makes them liable for the loan. So they have the substance of rights to assets and obligations for liabilities.
Conclusion: this overrides legal form. Gamma is a joint operation.
Treatment: Alpha recognises its assets, liabilities, revenue and expenses according to its contractual rights and obligations. Its share is 60%, set by the contract. It is not 50%, which is the shareholding.
Assets: 60% × ₹1,00,00,000 = ₹60,00,000 of plant.
Liabilities: 60% × ₹40,00,000 = ₹24,00,000 of the loan.
Expenses: 60% × ₹80,00,000 = ₹48,00,000 of Gamma's production costs, recognised by nature under the relevant standards. The price Alpha pays covers this share of costs, so Alpha does not also record a separate purchase from Gamma. That would double count.
Revenue: Alpha recognises the revenue from selling its 60% of the output to third parties.
The ₹48,00,000 output cost is only part of the picture. Alpha also recognises its share of the assets and liabilities, and its revenue.

Answer: Gamma is a joint operation despite being a company. Alpha's share is 60%, fixed by the contract, not the 50% shareholding. Alpha recognises plant of ₹60,00,000, a loan of ₹24,00,000, expenses of ₹48,00,000 and its revenue from selling its share of the output. The ₹48,00,000 is only the cost element.

Example 2

Delta owns 40% of Epsilon, a joint venture under IFRS 11. Delta bought the shares for ₹50,00,000 at the start of the year. Epsilon's profit after tax for the year was ₹30,00,000 and it paid dividends of ₹10,00,000 in total. Calculate the carrying amount of Delta's investment at the year end and the amount in Delta's profit or loss.

Show the solution

Classification given: joint venture, so use the equity method.
Share of profit = 40% × ₹30,00,000 = ₹12,00,000.
Dividend received = 40% × ₹10,00,000 = ₹4,00,000. This reduces the investment and is not income.
Closing investment = ₹50,00,000 + ₹12,00,000 − ₹4,00,000 = ₹58,00,000.
Profit or loss shows one line: share of profit of joint venture ₹12,00,000.

Answer: Carrying amount of the investment is ₹58,00,000. Delta's profit or loss includes ₹12,00,000 as share of profit of the joint venture.

Exam tips

Classify before you calculate. Examiners give marks for the reasoning on classification, so write each test and the fact that supports it.
When a separate vehicle exists, always say you have considered legal form, contractual terms and other facts. Then say which one decides the outcome.
Expect a scenario where the legal form suggests a joint venture but the facts show a joint operation. Look for output taken by the parties and parties funding the debts.
In professional skills marks, show commercial judgement. Comment on how classification changes reported assets, liabilities, revenue and gearing.

Practice questions from Associates and joint arrangements

Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Joint Arrangements: Joint Operations and Joint Ventures (IFRS 11): frequently asked questions

What is the main difference between a joint operation and a joint venture?

In a joint operation, the parties have rights to the assets and obligations for the liabilities. In a joint venture, they have rights only to the net assets. This drives the accounting: line by line for a joint operation, equity method for a joint venture.

How does a joint operator account for its interest?

It recognises its own assets and liabilities, its share of any jointly held assets and liabilities, its revenue from selling its share of output, its share of joint revenue, and its expenses. It applies the relevant IFRS to each item.

Can a joint arrangement through a company be a joint operation?

Yes. A separate company usually gives rights to net assets, but the contract or other facts can change this. If the parties take substantially all the output and fund the liabilities, it is a joint operation.

Is proportionate consolidation allowed for joint ventures under IFRS 11?

No. Joint ventures are accounted for using the equity method under IAS 28. Line-by-line recognition is only for a joint operator's share in a joint operation.