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CA Final · Financial Reporting · Ind AS 111 Joint Arrangements

Veda Infra Ltd and Kiran Builders Ltd sign a contractual arrangement to build a toll road. Decisions on relevant activities need unanimous consent of both parties. Which of the following best describes how the arrangement is classified at the first level under Ind AS 111?

The arrangement is a joint arrangement because two or more parties have joint control through unanimous consent on relevant activities. Under Ind AS 111 a joint arrangement is then classified as either a joint operation or a joint venture; it is not a subsidiary or associate.

  1. AAs a joint arrangement, because two or more parties have joint control, which is either a joint operation or a joint ventureCorrect
  2. BAs a subsidiary of Veda Infra Ltd, because it is the larger party
  3. CAs an associate of both parties, because each has significant influence
  4. DAs a financial asset of each party measured under Ind AS 109

Explanation

Ind AS 111 defines a joint arrangement as an arrangement of which two or more parties have joint control. Unanimous consent over relevant activities indicates joint control. A joint arrangement is then either a joint operation or a joint venture. Associate or subsidiary treatment applies only where joint control is absent.

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