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CA Final · Financial Reporting · Ind AS 111 Joint Arrangements

Asha Textiles Ltd and Bharat Dyes Ltd sign a contractual arrangement under which decisions on the relevant activities need the unanimous consent of both parties. Under Ind AS 111, how are such arrangements classified at the highest level?

Under Ind AS 111, a joint arrangement, meaning an arrangement where two or more parties have joint control, is classified as either a joint operation or a joint venture. It is not a subsidiary, associate or automatically a financial asset.

  1. AA joint arrangement is either a joint operation or a joint ventureCorrect
  2. BA joint arrangement is either a subsidiary or an associate
  3. CA joint arrangement is either a joint operation or an associate
  4. DA joint arrangement is classified as a financial asset under Ind AS 109 in all cases

Explanation

Ind AS 111 states that a joint arrangement is either a joint operation or a joint venture. The arrangement has two or more parties with joint control, so subsidiary or associate labels do not apply to the arrangement itself. Treating it as a financial asset in all cases is wrong because that applies only to arrangements outside the scope of Ind AS 111.

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