Is an agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization?
IAS 31 applies to accounting for all interests in joint ventures and the reporting of joint venture assets, liabilities, income, and expenses in the financial statements of venturers and investors, regardless of the structures or forms under which the joint venture activities take place, except for investments held by a venture capital organisation, mutual fund, unit trust, and similar entity that (by election or requirement) are accounted for as under IAS 39 at fair value with fair value changes recognised in profit or loss. [IAS 31.1] Show
Joint venture: a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Venturer: a party to a joint venture and has joint control over that joint venture. Investor in a joint venture: a party to a joint venture and does not have joint control over that joint venture. Control: the power to govern the financial and operating policies of an activity so as to obtain benefits from it. Joint control: the contractually agreed sharing of control over an economic activity. Joint control exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the venturers. Jointly controlled operations involve the use of assets and other resources of the venturers rather than the establishment of a separate entity. Each venturer uses its own assets, incurs its own expenses and liabilities, and raises its own finance. [IAS 31.13] IAS 31 requires that the venturer should recognise in its financial statements the assets that it controls, the liabilities that it incurs, the expenses that it incurs, and its share of the income from the sale of goods or services by the joint venture. [IAS 31.15] Jointly controlled assets involve the joint control, and often the joint ownership, of assets dedicated to the joint venture. Each venturer may take a share of the output from the assets and each bears a share of the expenses incurred. [IAS 31.18] IAS 31 requires that the venturer should recognise in its financial statements its share of the joint assets, any liabilities that it has incurred directly and its share of any liabilities incurred jointly with the other venturers, income from the sale or use of its share of the output of the joint venture, its share of expenses incurred by the joint venture and expenses incurred directly in respect of its interest in the joint venture. [IAS 31.21] A jointly controlled entity is a corporation, partnership, or other entity in which two or more venturers have an interest, under a contractual arrangement that establishes joint control over the entity. [IAS 31.24] Each venturer usually contributes cash or other resources to the jointly controlled entity. Those contributions are included in the accounting records of the venturer and recognised in the venturer's financial statements as an investment in the jointly controlled entity. [IAS 31.29] IAS 31 allows two treatments of accounting for an investment in jointly controlled entities – except as noted below:
Proportionate consolidation or equity method are not required in the following exceptional circumstances: [IAS 31.1-2]
Under proportionate consolidation, the balance sheet of the venturer includes its share of the assets that it controls jointly and its share of the liabilities for which it is jointly responsible. The income statement of the venturer includes its share of the income and expenses of the jointly controlled entity. [IAS 31.33] IAS 31 allows for the use of two different reporting formats for presenting proportionate consolidation: [IAS 31.34]
Procedures for applying the equity method are the same as those described in IAS 28 Investments in Associates. In the separate financial statements of the venturer, its interests in the joint venture should be: [IAS 31.46]
If a venturer contributes or sells an asset to a jointly controlled entity, while the assets are retained by the joint venture, provided that the venturer has transferred the risks and rewards of ownership, it should recognise only the proportion of the gain attributable to the other venturers. The venturer should recognise the full amount of any loss incurred when the contribution or sale provides evidence of a reduction in the net realisable value of current assets or an impairment loss. [IAS 31.48] The requirements for recognition of gains and losses apply equally to non-monetary contributions unless the gain or loss cannot be measured, or the other venturers contribute similar assets. Unrealised gains or losses should be eliminated against the underlying assets (proportionate consolidation) or against the investment (equity method). [SIC-13] When a venturer purchases assets from a jointly controlled entity, it should not recognise its share of the gain until it resells the asset to an independent party. Losses should be recognised when they represent a reduction in the net realisable value of current assets or an impairment loss. [IAS 31.49] An investor in a joint venture who does not have joint control should report its interest in a joint venture in its consolidated financial statements either: [IAS 31.51]
If an investor loses joint control of a jointly controlled entity, it derecognises that investment and recognises in profit or loss the difference between the sum of the proceeds received and any retained interest, and the carrying amount of the investment in the jointly controlled entity at the date when joint control is lost. [IAS 31.45] A venturer is required to disclose:
Venture capital organisations or mutual funds that account for their interests in jointly controlled entities in accordance with IAS 39 must make the disclosures required by IAS 31.55-56. [IAS 31.1] Is an agreement between two entities to exchange goods or services?A transaction is an agreement between two entities to exchange goods or services OR any other event that can be measured in economic terms by an organization. EXAMPLES: Sell goods to customers; depreciate equipment.
Is a process that begins with capturing data about transaction and ends with information output such financial statements?The accounting cycle is a collective process of identifying, analyzing, and recording the accounting events of a company. It is a standard 8-step process that begins when a transaction occurs and ends with its inclusion in the financial statements.
What are the types of transaction cycles?similar types of transactions are grouped together into three transaction cycles:. the expenditure cycle,. the conversion cycle, and.. the revenue cycle.. Is a recurring set of business activities and related data processing operations associated with the manufacturing of products?The production cycle is a recurring set of business activities and related data processing operations associated with the manufacture of products. Information flows to the production cycle from other cycles.
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