To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).
Day 54 (1 May)
A new month, a new section: Section 15 on Joint Ventures. Whereas FRS 9 bundled this together with associates, the two topics now occupy adjacent sections in FRS 102.
Section 15 focuses on JVs (that is, JCOs, JCAs and/or JCEs). Confused? Yes, this section contains more joints than an acrobat in a drugs den. Let's look at what each one means:
Joint Venture (JV) is the umbrella term defined in the Glossary as a 'contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.' Joint control specifically means that any strategic or operational decisions require the unanimous consent of the venturers. Thus a 50:50 shareholding in a company may not always imply a JV, though it would lead to awkward shareholders' meetings if the two parties can't agree. The idea is that the venturers have purposefully decided to cooperate in running the JV.
The other three terms are specific types of JV:
- Jointly Controlled Entities (JCEs) are the most common kind; the JV is a corporate body, partnership or similar entity which is jointly controlled.
- Jointly Controlled Operations (JCOs) are, in essence, joint projects which are not entities. Thus the venturers use their own assets and resources, incur their own expenses and are self-financing. There is normally a revenue-sharing agreement that divides the return equitably between the venturers.
- Jointly Controlled Assets (JCAs) are assets which are jointly controlled and typically jointly owned by the venturers, each one accounting for its share of the asset as well as any consequential liabilities, income and expenses.
That'll do for today. Monday is bank holiday, and I will spend the day at my other employment (as a biscuit sampler for McVitie's). Back on Tuesday.
P.S. If you missed the last instalment click here