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CA Final · Financial Reporting · Ind AS 111 Joint Arrangements

Alpha Ltd and Beta Ltd, both Indian companies, sign a contractual arrangement under which they have joint control over a project to build a toll road. Before deciding how Alpha should account for its interest, which statement correctly classifies the arrangement under Ind AS 111?

An arrangement in which two or more parties have joint control is a joint arrangement, and Ind AS 111 says a joint arrangement is either a joint operation or a joint venture. Joint control alone does not decide which; the classification is made separately.

  1. AIt is a joint arrangement, and it must be either a joint operation or a joint ventureCorrect
  2. BIt is a joint arrangement, and it is always a joint venture because two entities share control
  3. CIt is a joint operation only if a separate vehicle is not used, otherwise it falls outside Ind AS 111
  4. DIt is a subsidiary of the party holding the larger economic interest

Explanation

Ind AS 111 defines a joint arrangement as an arrangement of which two or more parties have joint control. Paragraph 6 states that a joint arrangement is either a joint operation or a joint venture. Option B is wrong because joint control alone does not make it a joint venture. Option C is wrong because an arrangement with joint control stays within the standard whether or not a separate vehicle exists.

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