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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.
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