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CA Final · Financial Reporting · Ind AS 111 Joint Arrangements

Aarav Infra Ltd and Bhavya Realty Ltd sign a contract to develop a township. Decisions on the relevant activities need unanimous consent of both, and the contract gives each of them rights in the arrangement. Which feature must be present for this to be a joint arrangement under Ind AS 111?

A joint arrangement is defined as an arrangement of which two or more parties have joint control. Equal shareholding, a separate entity or majority voting power is not part of the definition, so joint control by two or more parties is the essential feature.

  1. ABoth parties must hold equal equity shares in a separate vehicle
  2. BTwo or more parties must have joint control of the arrangementCorrect
  3. COne party must hold a majority of voting rights
  4. DThe arrangement must be set up through a separate legal entity

Explanation

Ind AS 111 defines a joint arrangement as an arrangement of which two or more parties have joint control. Equal shareholding, majority voting or a separate legal entity are not required by the definition. A majority holder controlling decisions would point away from joint control.

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