Hong Kong Financial Reporting Standard 11 - Joint Arrangements

HKFRS 11 is issued by Hong Kong Institute of Certified Public Accountants in June 2011, and supersedes HKAS 31 Interests in Joint Ventures and HK(SIC)-Int 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers.

The new standard defines a joint arrangement as "an arrangement of which two or more parties have joint control and the parties are bound by a contractual arrangement". A joint arrangement is either a joint operation or a joint venture. A joint operation combines the concept of jointly controlled assets and jointly controlled operations while joint venture is similar to jointly controlled entity as currently defined.

A joint operation is one whereby the jointly controlling parties, known as the joint operators, have rights to the assets, and obligations for the liabilities, relating to the arrangement.While, a joint venture is one whereby the jointly controlling parties, known as the joint ventures, have rights to the net assets of the arrangement. The methods of recognizing the joint arrangement applied by a joint operator and joint venturer are different. Joint operator recognises its own assets, liabilities and transactions, including its share of those incurred jointly. And joint operator applies Equity method in accordance with HKAS 28 (2011) for its consolidated financial statements

HKFRS 11 is effective for annual periods beginning on or after 1 January 2013. Early adoption is permitted provided that the entire suite of consolidation standards is all adopted at the same time.

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