Page 21 - FAC4862 slides JAs and Revenue CM
P. 21
JOINT ARRANGEMENTS
Basic Example 2
• A Ltd and B Ltd are parties to a joint arrangement and
they have agreed to manufacture a product together.
The manufacturing agreement is structured in a
separate vehicle, entity P. The legal form causes it to
be considered in its own right, and thus the assets
and liabilities held in entity P are the assets and
liabilities of entity P and not the assets and liabilities
of the parties A Ltd and B Ltd.
• The contractual agreement between the parties state
that the parties will purchase the entire production
of the product manufactured by entity P. Entity P will
sell the product to the parties at a price as agreed by
A Ltd and B Ltd. Any cash flow shortages of entity P
will be financed by A Ltd and B Ltd in accordance with
their ownership interests. 21
