Page 25 - PowerPoint Presentation

JOINT ARRANGEMENTS
Basic Example 2

• Although a separate entity is established and the legal

structure creates separation between the parties and the

entity, and the contractual agreement does not specify
that the parties have rights to the assets and obligations

for the liabilities, other relevant facts and circumstances

conclude that the joint arrangement is a joint operation.

• The parties have committed themselves to purchasing the

entire production manufactured, thus A Ltd and B Ltd
have rights to all the economic benefits of the assets of

the agreement. The dependence of entity P on A Ltd and

B Ltd, which provide all financial assistance, results in A

Ltd and B Ltd having direct obligations for the liabilities of
entity P.

• Each party to the joint operation should recognise in its

separate financial statements the share of the assets and

liabilities used for the specific task, and recognise its share
of the revenues and expenses in accordance with the

contractual arrangement.
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