pexels photo 209224

Difference between joint operation and joint venture.

IFRS 11 describes two types of joint arrangements and specifies the accounting requirement for each. The two types of the joint arrangement identified by IFRS 11 are joint operation and joint venture

A joint arrangement is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. There must be a contractual agreement between the parties which gives at least two of them joint control over the enterprise. Joint control means the decision need unanimous consent

There are two types of joint arrangement these are:

Joint operation; this is an arrangement in which each venturer has control of individual assets and liabilities of the arrangement, as determined by the substance of the contract setting up the joint operation. The operation may or may not be a separate entity. Each venturer accounts for the elements (assets, liabilities, expenses, and income) under its control on an individual basis, line by line.

Joint venture: this arises when two or more parties set up a separate entity to be operated under joint control. Neither venturer controls individual assets or liabilities. Rather, they are jointly in control of the entire venture. There must be a separate legal entity. The entity will prepare its own separate financial statements and will be dealt with within the books of each venturer using equity accounting as for associate companies

5 thoughts on “Difference between joint operation and joint venture.”

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: