The Interpretations Committee has been discussing various implementation issues relating to IFRS 11 since November 2013. The Interpretations Committee discussed those issues at its meeting in November 2013, January 2014, March 2014, May 2014, July 2014 and September 2014.
The issues that have been addressed are as follows:
- Issue 1—classification of the joint arrangement (with regard to the assessment of ‘other facts and circumstances’);
- Issue 2—accounting by the joint operator; and
- Issue 3—accounting within the separate financial statements.
With regard to Issue 1(ie classification of the joint arrangement, especially with regard to the assessment of ‘other facts and circumstances’), the Interpretations Committee first examined conceptual aspects of the requirements for assessing ‘other facts and circumstances’. Specifically, it dealt with the following issues:
- Issue 1A—Whether or not the assessment of ‘other facts and circumstances’ should be based only on contractual (and legal) enforceable terms;
- Issue 1AA—How and why ‘other facts and circumstances’ create rights and obligations that result in a joint arrangement being classified as a joint operation.
On the basis of the conclusions and observations from Issue 1A and 1AA, the Interpretations Committee discussed how specific fact patterns affect the assessment of ‘other facts and circumstances’. The specific issues it considered were:
- Issue 1B—Does the fact that the output from the joint arrangement is sold at a market price prevent the joint arrangement from being classified as a joint operation, when assessing ‘other facts and circumstances’?
- Issue 1C—Does financing from a third party prevent an arrangement from being classified as a joint operation?
- Issue 1D—Does the nature of the output produced by the joint arrangement determine the classification of a joint arrangement when assessing ‘other facts and circumstances’?
- Issue 1E—When assessing ‘other facts and circumstances’ in the case in which parties are taking substantially all of the output, is the assessment based on volumes or monetary values?
- Issue 1F— How should the assessment of ‘other facts and circumstances’ be applied to a specific type of joint arrangement structure (so-called ‘project entity’)?
With regard to Issue 2 (ie accounting by the joint operators), the Interpretations Committee discussed this issue by considering a circumstance in which the joint arrangement is classified as a joint operation following the assessment of ‘other facts and circumstances’ which shows that:
- the parties to the joint arrangement purchase all output from the joint arrangement; and
- this fact, in addition to other facts, indicates that the parties have rights to the assets and obligations for the liabilities relating to the joint arrangement.
In that circumstance, the Interpretations Committee addressed how the joint operators should recognise assets, liabilities, revenues and expenses in relation to their interest in the joint operation by:
- Issue 2A—clarifying the requirements of paragraph 20 of IFRS 11; and
- Issue 2B—considering the accounting when the joint operators’ share of output purchased differs from their share of ownership interest in the joint operation.
With regard to Issue 3 (i.e. accounting within the separate financial statements), the Interpretations Committee discussed the accounting by the joint operation in its (separate) financial statements.
At its July 2014 meeting, the Interpretations Committee considered the next steps with regard to various issues that it had identified at its November 2013 meeting. The Interpretations Committee noted that its discussion on joint arrangements in its meetings from November 2013 would help stakeholders address implementation issues relating to IFRS 11. The Interpretations Committee therefore decided to discuss, at its next meeting, how it can best document its conclusions and observations from this work so that it will be helpful for stakeholders.
At its September 2014 meeting, the Interpretations Committee noted that the most appropriate way of documenting its work is to publish it in IFRIC Update rather than develop a new form of communication.
The Interpretations Committee also noted that a series of agenda decisions, each describing a separate aspect of its discussions and capable of standing alone, would be preferable. Consequently, the Interpretations Committee asked the staff to prepare separate summaries for each topic that has been discussed.
At its November 2014 meeting, the Interpretations Committee published seven separate tentative agenda decision on various issues in IFRIC Update.
At its March 2015 meeting, the Interpretations Committee finalised the tentative agenda decisions that it published in November 2014.