This document discusses accounting for investments in joint ventures. It defines a joint venture as a contractual agreement between two or more parties who have joint control over a business. There are three types of joint ventures: joint operations, joint assets, and joint entities. For joint operations, each venturer recognizes its assets, liabilities, expenses and share of income. For joint assets, each venturer recognizes its share of assets and liabilities and income/expenses. For joint entities, the venturer can use the cost, equity or fair value models to account for its investment. A key difference between a joint venture and associate is that a joint venture involves joint control while an associate involves significant influence.

1. 12/04/22
How do you account for
investment in a joint venture?
MPERS 15:
Investment in Joint Ventures
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2. What is investment in Joint
Ventures?
- A contractual agreement involved two or
more parties.
- The parties involved have joint control over
a business activity.
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3. Types of Joint Ventures
(i) Joint controlled operations
(ii) Joint controlled assets
(iii) Joint controlled entities
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4. (i) Joint controlled operations
● Two or more venturers use their resources or
expertise to produce a product.
● Each venture bears its expenses and liabilities
and raises its finance.
● The revenue from the sale of the joint product
and any expenses incurred in common are
shared among the venturers.
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5. (i) Joint controlled operations
Recognition in venturer's financial statements:
● Assets and liabilities incurred
● Expenses incurred and share of income
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6. (ii) Joint controlled assets
● The joint control, and often the joint
ownership, of assets dedicated to the joint
venture.
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7. (ii) Joint controlled assets
Recognition in venturer's financial statements:
● share of the jointly controlled assets
● share of any liabilities incurred jointly or
incurred by the venture
● share of income
● share of expenses incurred.
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8. (iii) Joint controlled entities
● A corporation, partnership, or other entity in
which each venturer has an interest.
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9. (iii) Joint controlled entities
Recognition in venturer's financial statements:
Cost model
● Cost less accumulated impairment losses
● Recognise distributions received from the
investment as income
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10. (iii) Joint controlled entities
Recognition in venturer's financial statements:
Equity model
● Recognise at the transaction price (including
transactions costs)
● Subsequently adjusted to reflect the
investor’s share of the profit or loss
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11. (iii) Joint controlled entities
Recognition in venturer's financial statements:
Fair value model
● Initially, measured at transaction price
(exclude transaction cost).
● Subsequently, measured at fair value, any
changes recognized in profit or loss
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12. What differentiates an interest in
the joint venture from an
investment in an associate?
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13. Investment in associate
The investor has significant influence over the
investee, by possessing the power to
participate in their financial and operating
decisions.
Joint venture
The parties involved have the power to joint
control over the arrangement.
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