PFRS 11-Joint Arrangements

PFRS 11- JOINT ARRANGEMENTS
1. Define a J.A. and state its characteristics.

2. Identify whether a J.A constitutes a joint
operation or a joint venture.
3. Account for Joint Operations.
4. Describe the accounting for joint ventures.
Effective Date:
• IFRS 11 was issued in 2011
• January 2013 or later
OBJECTIVE & SCOPE:
• PFRS 11 Joint
Arrangement prescribes
the principles for financial
reporting by parties to a
Joint Arrangement. This
standard should be
applied by all parties to a
Joint Arrangement.
DEFINITION:
• An arrangement of
which two or more
parties have joint
control.
CHARACTERISTICS :
• The parties are bound by a

contractual arrangement.
• The contractual arrangement
gives 2 or more of those
parties Joint Control of the
arrangement.
CONTRACTUAL
ARRANGEMENT
 The contractual arrangement
establishes joint control over
the Joint Arrangement
CONTRACTUAL
ARRANGEMENT
May be evidenced in a number of
ways:
CONTRACTUAL
ARRANGEMENT
The contractual arrangement deals with matters such as:
o The activity, duration and reporting obligations of the

JA
o The appointment of the BoD or equivalent governing
body of the JA and the voting rights of the parties.
o Capital contributions by the parties; and
o The sharing by the parties of the output, income,
expenses, or results of the JA
JOINT  Joint control is the contractually agreed sharing
CONTROL of control of an arrangement, which exists only
when decisions about the relevant activities
require the unanimous consent of the parties
sharing control.
A party to a joint arrangement – an entity

that participates in a joint arrangement,
regardless of whether that entity has a
joint control of the arrangement.
A B C
50% 30% 20%
CASE #1
75%
A B C
50% 25% 25%
CASE #2
75%
A B C
35% 35% 30%
CASE #3
Approval
by Majority
TYPES OF JOINT ARRANGEMENT
JOINT ARRANGEMENT
JOINT VENTURE JOINT OPERATION
Parties or Joint Venturers Parties or Joint Operators

have rights to the NET have rights to ASSETS, +
ASSETS of the J.A. Obligations for LIABILITIES
of the J.A.
Classifying
Joint Arrangements
Ella Mae
Ampuyas
Classifying Joint Arrangement
Joint
Joint Arrangement
Arrangement
Joint
Joint Venture
Venture Joint
Joint Operation
Operation
Parties (joint venturers) have Parties (joint operators) have

rights to net assets of J.A. rights to assets and
obligations to liabilities of J.A.
RIGHTS
RIGHTS OBLIGATIONS
OBLIGATIONS
Joint Operation Joint
Venture
ASSETS = LIABILITIES +
EQUITY
Joint
Joint Arrangement
Arrangement
Joint Venture OR Joint Operation

Is joint arrangement YES
structured through
separate vehicle? NO Joint Operation
A separately identifiable financial structure

Financial
Financial Statements
Statements of
of parties
parties to
to aa J.A.
J.A.
Joint
Joint Venture
Venture Joint
Joint Operation
Operation
 Its assets (+its share on any assets held jointly)

Equity Method
 Its liabilities (+its share on any liabilities held
(IAS 28 Investments in
Associates and Joint jointly)
 Its revenue from the sale of its share of the
Ventures)
output from the joint operation
 Its share of the revenue from the sale of the
output from the joint operation
 Its expenses (+its share on any expenses held
jointly)
Accounting for Joint Operation – partnership in
nature
Joint Operation Profit or
Loss
a. Completed joint operation
b. Uncompleted joint operation
Cash settlement
Joint Operation Profit or Loss
 debited for all costs and expenses
Joint Operation account
 credited for all incomes
represents loss xx
Joint Operation Profit or
Loss
 debited for all costs and expenses
Joint operation account
 credited for all incomes
represents profit xx
Cash settlement
 cash due or from the participant upon completion of the

Joint Operation undertaking
1. The participants’ balances are initially determined.
2. If there is a credit balance in the participants’ account,
he/she will receive cash equal to his/her credit balance.
3. If there is a debit balance in the participants’ account, he/she
will pay cash equal to his/her debit balance.
Case #101
A, B, and C each engaged in the extraction of oil, agreed to acquire and jointly
operate an oil pipeline. Each party will use the pipeline to transport its own
product in return for which it bears an agreed proportion of the expenses of
operating the pipeline. A, B, and C agreed to share equally on the cost of
acquiring the pipeline and the expenses of operating it.
Answer: Joint Operation

Case #102
A and B agreed to combine their operations, resources and expertise to

manufacture, market and distribute jointly a particular product. Different parts
of the manufacturing process are carried out by each of the parties. Each party
bears its own costs and takes a share of the revenue from the sale of the
product equally.
Answer: Joint Operation

Case #203
A and B entered into a joint agreement to form Alphabets Corporation which

shall manufacture materials required by A and B for their own individual
manufacturing processes. The arrangement ensures that the parties operate
the facility that produces the materials to the quantity and quality
specifications of the parties.
Each party shall have 50% ownership interest in Alphabets Corporation.

Alphabets Corporation shall have its own assets, incurs its own obligation, and
generates and incurs its own income and expenses.
Answer: Joint Venture

Sample Problems
Completed Joint Operations

1.) K and L form a joint arrangement for the sale of a certain
merchandise. The joint operators agree to the following: K shall be
allowed a commission of 10% on his net purchases; the joint operators
shall be allowed commissions of 25% on their respective sales; and K
and L shall divide the profit or loss 60% and 40% respectively. Joint
arrangements transactions follow:
Dec. 1. K make cash purchase of 57,000.00

3. L pays joint arrangement expenses of 9,000.00
5. Sales are as follows: K, 48,000; L, 36,000.
7. K returns unsold merchandise and receives 15,000 cash
15. The operators make cash settlement.
Questions:
1. In the distribution of the balance in net profit of the joint arrangement,
the shares of K and L:

2. In the final cash settlement, L would pay K the amount of:
2.) The joint operations accounts int the books of the
operators, X, Y, Z, show the balances below, upon the
termination of the joint arrangement and distribution
of the profits:

Accounts X Y Z
Dr (Cr) Dr (Cr) Dr (Cr)
X - 2500 2500
Y 4000 - 4000
Z (65000) (65000) -

Question
Final settlement of the joint operations will require
payments as follows:
UNCOMPLETED
JOINT
OPERATIONS
Soriente, Santos and Salazar formed a joint operation.
Soriente has been designated as manager of the
arrangements for which he is to receive a bonus of 15% of
the profit after deduction of the bonus as an expense. The
net profit, after the bonus has been agreed to be divided as
follows: Soriente 25%; Santos 40% and Salazar 35%.
After 5 months the joint arrangement is terminated as of
May 31, 2012. On this date the trial balance kept by
Soriente contains the following balances

Debit Credit
Investment in Joint arrangement 9000
Santos 500
Salazar 2000

The joint operations have still some undisposed
merchandise which Soriente agreed to purchase at its cost
Questions:
1. The net profit of the joint arrangement

after bonus to Soriente is?
2. The share of Santos in the joint

arrangement is?
3. The cash settlement received by Santos

and Salazar is?

Uncompleted Joint
Arrangement
On July 1, 2012, Andres, Bantug and Carlos formed a
joint arrangement for the sale of merchandise. Andres
was designated as the managing joint operator. Profits
or losses are to be decided as follows: Andres 50%,
Bantug 25% and Carlos 25%. On October 1, 2012,
though the joint arrangement was still uncompleted,
the operators agreed to recognize profits or loss on the
venture to date. The cost of inventory on hand was
determined at P25000. The joint arrangement account
has a debit balance of P15000 before distribution of
profit or loss. No separate book is maintained for the
joint arrangement and the joint operators record in
their individual books all joint arrangement
Questions:
1. The joint arrangement Profit or Loss on October 1, 2012

is?
2. The distribution of the arrangement profit or (loss) on

October 1, 2012 to the operators shall be what amounts
each?
JOINT VENTURE
SAMPLE
PROBLEMS
BY: CHERRY BALONGCAS
PFRS 11
• A joint venturer recognizes its interest in
a joint venture as an investment and
shall account for that investment using
the equity method in accordance
with PAS 28 Investments in Associates
and Joint Ventures unless the entity is
exempted from applying the equity
method as specified in that standard.
EQUITY
METHOD
The investment is initially recognized at cost
and subsequently adjusted for the investor’s
share in the changes in the equity of the
investee’s:
 Profit or Loss
 Dividends declared
 Results of discontinued operations
 Other comprehensive income

EQUITY METHOD
+ Initial investment recorded at cost

+/- Investor's share of joint venture
profit or loss
- Distributions received from the joint
venture
= Ending investment in joint venture
Lion Inc. purchases 30% of Zombie Corp for $500,000.
At the end of the year, Zombie Corp reports a
net income of $100,000 and a dividend of $50,000 to its
shareholders.
PURCHASE: (at cost)
Investment in Associates 500,000

Cash 500,000
RECEIVED DIVIDENDS: ( 50,000 *30%)
Cash 15,000
SHARE IN NET INCOME: (100,000*30%)

Investment Revenue 30,000
Investment in Associates
500,000 15,000
30,000
end balance 515,000

Ace company purchases 40% of Basket Company on January 1
for P500,000 that carry voting rights at a general meeting of
shareholders of Basket Company. Ace Company and Blake
Company immediately agreed to share control (wherein
unanimous consent is needed to all parties involved) over Basket
Company. Basket reports assets on the date of 1,400,000 with
liabilities of 500,000. One building with a seven-year life is
undervalued on Basket’s books by 140,000. Also, Basket’s book
value for its trademark (10 year life) is undervalued by 210,000.
During the year, Basket reports net income of 90,000, while
paying dividends of 30,000.
1. What is the investment in Basket Company balance in Ace’s

financial records as of December 31?
@cost 500,000
Share in NI (90,000*40%) 36,000
Rec. Dividend (30,000*40%) (12,000)
Bldg. (140,000/7)*40% (8,000)
Trademark (210,000/10)*40% (8,400)
Investment 507,600
2. The income from investment in Basket Company in Ace’s
financial records as of December 31?
ANSWER: (90,000 x 40%) = 36,000 -16,400 = 19,600

Goldman Company reports net income of 140,000
each year and pays an annual cash dividend of 50,000.
The company holds net assets of 1,200,000 on January 1,
2013. On that date, Wallace Company purchases 40% of
the outstanding stocks for P600,000, which gives it the
ability to have a joint control with Zimmerman Company
over Goldman. At the purchase date, the excess to
Wallace’s cost over its proportionate share of Goldman
book value was assigned to Goodwill.
1. On December 31, 2015, what is the investment in

Goldman Company balance in Wallace’s financial
records?
ANSWER: 708,000
2. Assuming that the Goldman Company’s ownership structure is as
follows:
75% is needed to direct relevant activities
50% ownership of Wallace Company
30% ownership of Zimmerman Company
20% ownership of American Company

What is the amount of income from the income from investment in
Goldman’s Company in Wallace financial records as of December 31,
2015?
ANSWER: 70,000
3. Assuming that the Goldman Company’s ownership structure is as

follows:
75% is needed to direct relevant activities
50% ownership of Wallace Company
25% ownership of Zimmerman Company
25% ownership of American Company

What is the amount of income from the income from investment in
Goldman’s Company in Wallace financial records as of December 31,
2015?
 PAS 28 provides that
“Gains and Losses
resulting from the
upstream and downstream
transactions between an
entity (including its
consolidated subsidiaries)
and its associates or joint
venture are recognized in
the entity’s financial
statements only to the
extent of unrelated
investor’s interests in
the associate or joint
ventures.
EQUITY METHOD- Downstream Sale of
Inventory
ABC Co. owns 20% in the JV Inc. and uses the equity method
to account for its interest in the joint venture. ABC has joint
control over JV Inc. in 2019, ABC sold inventory to JV for P100,000
with a 60% gross profit on the transaction. The inventory remains
unsold during 2019 and was sold by JV to external parties only in
2020. ABC’s income tax rate is 30%. JV Inc. reports profit of
P1,000,000 in 2019. The share in the profit of the joint venture is
computed as:
Profit in JV, 2019 1,000,000

x Ownership Interest 20%
Share in profit before adj. 200,000
Unrealized Profit – net of tax (100k x 60% x 70%) (42,000)
Adjusted Share in profit of joint venture,2019
158,000

Investment in joint venture 158,000

EQUITY METHOD- Upstream sale of Inventory
ABC Co. owns 20% of JV and uses the equity method to

account for is interest in the joint venture. ABC has joint control
over JV in 2019. JV sells inventory to ABC for P100,000 with 60%
gross profit on the transaction. The inventory remains unsold
during 2019 and was sold by ABC to external parties only in 2020.
ABC’s income tax rate is 30% .JV reports profit of P1,000,000 in
2019.
Profit of JV, 2019 1,000,000

X Ownership interest 20%
Unrealized profit net of tax (100k x 60% x 70% x 20%)
(8,400)
Adjusted share in profit in joint venture, 2019 191,600

Dec 31, 2019

REMEMBER!
 Downstream Transaction- eliminate

entire unrealized profit.
 Upstream Transaction- eliminate

investor’s share in unrealized profit.
EQUITY METHOD: Downstream Sale of Depreciable Asset
ABC Co. owns 20% of JV and uses the equity method to account
for is interest in the joint venture. ABC has joint control over JV in
2019. On January 1, 2019, ABC sold equipment with a carrying
amount of P100,000 and a remaining useful life of 10 years to JV
for P120,000. Gain of P20,000 was recorded by ABC, Both ABC and
JV use straight line method of depreciation. JV reports a profit of
P1,000,000 in 2019.

Profit of JV 1,000,000
Unrealized gain (20,000 x 9/10) (18,000)
Adjusted share in profit of joint venture, 2019 182,000

Share in profit of joint venture 182,000
Depreciable Asset is sold to unrelated party before
it is fully depreciated: Any remaining balance of the
UG is recognized as part of the share of profit in
the year of the sale.
JV profit in 2020 is P1,200,000
Realized gain (20,000/10) 2,000
Use the same information from the previous problem except
that the sale is an upstream sale.
Unrealized gain (20,000 x 9/10 x 20%) (3,600)

Share in profit of joint venture 196,400
Depreciable Asset is sold to unrelated party before it is
fully depreciated:
JV profit in 2020 is P1,200,000
Realized gain (20,000/10) x 20% 400
EQUITY METHOD- Downstream sale of non-depreciable asset
ABC Co. owns 20% interest of JV and uses the equity method to account for its
interest in the joint venture. ABC has joint control over JV. On January 1, 2019, ABC
sold land with a carrying amount of P100,000 to JV for P120,000. Gain of P20,000
was recorded by ABC. JV reports profit of P1,000,000.
Unrealized gain (20,000)
If the land is sold to unrelated party in 2020 and JV
reported a profit of P1,200,000
Share in profit of joint venture, 2020 240,000
NOTE!
No adjustment is made in 2020.
EQUITY METHOD- Upstream sale of non-depreciable
asset
Use the same information from the previous problem

except that the sale is an upstream sale.
Unrealized gain (20,000 x 20%) (4,000)
Adjusted share in profit of joint venture, 2019
196,000
ACCTG 133 AFAR 3
JOINT OPERATIONS
FOR
SMEs
Reported by:
JASPER JESS P. APIAG
ACCTG 133 AFAR 3
PFRS for SMEs

Reported by:
ACCTG 133 AFAR 3
Joint Venture for SMEs
It is a contractual arrangement whereby two or

more parties undertake an economic activity that is
subject to joint control.
Joint Control is the contractually agreed sharing
of control over an economic activity and exists only
when the strategic financial and operating
decisions relating to the activity require the
unanimous consent of the parties sharing control.
ACCTG 133 AFAR 3
Joint Venture for SMEs
Forms of Joint Venture:
1. Jointly Controlled Operations

2. Jointly Controlled Assets
3. Jointly Controlled Entities
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Reported by:
ACCTG 133 AFAR 3
Jointly Controlled
Operations
It involves the use of the assets and other

resources of the venturers rather than the
establishment of a corporation, partnership or other
entity, or a financial structure that is separate from
the venturers themselves. The venture agreement
usually provides an agreement by which the
revenue and any expenses incurred in common are
shared among the venturers.
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Accounting Procedures
a. The assets that it controls and the liabilities that

it incurs
b. The expenses that it incurs and its share of the
income that it earns from the sale of goods or
services by the joint venture
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Illustration
Co. BA & Co. Eng’g form a joint venture to participate in a

bidding to construct a bridge connecting two cities for the
government. After the bidding process, they are jointly
contracted with the government for the construction and
delivery of the bridge for a bid price of P20 M (fixed).
In 2019, in accordance with the agreement between BA &
Eng’g:
• Cos. BA & Eng’g used their own equipment and employees in
the construction activity.
• BA incurred construction cost and expenses totaling P9 M
out of which P7 M was paid in cash and the balance
evidenced by a promissory note.
• Eng’g incurred construction cost and expenses amounting to
P7 M.
• The bridge was completed and delivered to the government.
Co. BA & Eng’g shared 60:40, respectively.
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Entries:
Co. BA
Construction costs
Cash
Notes payable
to record the construction costs and expenses
incurred
Cash
Contruction revenue
to recognize the revenue earned
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Entries:
Co. BA
Construction costs 9M
Cash 7M
Notes payable 2M
incurred
Cash 12M
Contruction revenue 12M
to recognize the revenue earned (60% of 20M)
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Entries:
Co. Eng’g
Construction costs
Cash
incurred
Cash
Contruction revenue
to recognize the revenue earned
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Entries:
Co. Eng’g
Construction costs 7M
Cash 7M
incurred
Cash 8M
Contruction revenue 8M
to recognize the revenue earned (40% of 20M)
ACCTG 133 AFAR 3
Jointly Controlled
Operations
Take note that:
1. Co. BA & Eng’g have retained control of their

own assets they use to perform the contract
requirement.
2. BA & Eng’g are responsible for their respective
liabilities.
3. They recognize the expenses associated with
the construction services.
4. They recognize their respective shares in the
revenues related to the construction services.
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Reported by:
ACCTG 133 AFAR 3
Jointly Controlled
Assets
It involves the joint control, and often the joint

ownership, by the parties (venturers) of one or
more assets contributed to, or acquired and
dedicated for the purpose of the joint venture.
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Accounting Procedures
a. Its share of the jointly controlled assets

b. Any liabilities that it has incurred
c. Its share of any liabilities incurred jointly with the
other venturers in relation to the joint venture
d. Any income from the sale or use of its share of the
output of the joint venture, together with its share
of any expenses incurred
e. Its share of any expenses incurred by the joint
venture
f. Any expenses that it has incurred in respect of its
interest in the joint venture
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Illustration
On Jan. 2, 2019, entities BA, H and Y jointly bought a helicopter for

P150 M cash. The contractual agreements of the venturers are:
• The helicopter is at the disposal of each venturer for 70 days each
year.
• The helicopter is in maintenance for the remaining days each year.
• The venturers may decide to use the helicopter or lease it to a 3 rd
party.
• Maintenance and disposal of the helicopter require the unanimous
consent of the venturers.
• The expected life of the helicopter is 20 years with a residual value
of P10 M. Straight line depreciation was used.
Summary transactions during 2019:
1. The venturers each paid P200,000 to meet the joint costs of
maintaining the helicopter.
2. Entity BA incurred costs of P80,000 in pilot fees and aviation fuel.
3. Entity BA earned rental income of P250,000 by renting the
helicopter to others.
4. The maintenance cost was P3 M.
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Entries:
Entity BA:
PPE
Cash
to record the purchase of an ownership-interest
Operation expenses
Cash
to record costs of running the helicopter
Cash
Rental income
to recognize income earned by renting to others
Operation expenses
Cash
to recognize maintenance cost
Depreciation expenses
Accum. Depreciation
to record depreciation
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Entries:
Entity BA:
PPE (P150M x 1/3) 50,000,000

Cash 50,000,000
to record the purchase of an ownership-interest
Operation expenses (P200K + P80K) 280,000

Cash 280,000
to record costs of running the helicopter
Cash 250,000
Rental income 250,000
to recognize income earned by renting to others
Operation expenses (P3M x 1/3) 1,000,000

Cash 1,000,000
to recognize maintenance cost
Depreciation expenses 2,333,333

Accum. Depreciation2,333,333
to record depreciation
ACCTG 133 AFAR 3
Jointly Controlled
Assets
Take note that:
1. Entity BA records his own income earned and

expenses incurred due to the use/lease of the
helicopter.
2. Entity BA recognizes his share in the expenses
incurred by the jointly controlled helicopter.
3. Entity BA records the purchase of an ownership-
interest in a jointly controlled helicopter.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
Reported by:
ACCTG 133 AFAR 3
Jointly Controlled
Entities
It involves the establishment of a corporation,

partnership or other entity in which each venturer
has an interest. The entity operates in the same
way as other entities, except that a contractual
arrangement among the venturers establishes joint
control over the economic activity of the entity.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
Methods:
1. Cost Model
2. Equity Method
3. Fair Value Model (through profit or loss)
ACCTG 133 AFAR 3
Jointly Controlled
Entities
Equity Fair Value
Cost Model
Method Model
Published If there’s
No published
price published price
price quotation
quotation quotation
Includes Includes Excludes
Transaction
transaction transaction transaction
costs
costs costs costs
Investment in
Dividends Dividend jointly Dividend
received income (to P/L) controlled income (to P/L)
entity
Share in
Recognize
profit or loss
No
Subsequent
Cost less Cost less impairment.
measuremen
impairment impairment Changes in FV
t
to P/L
ACCTG 133 AFAR 3
Jointly Controlled
Entities
Illustration:
On Jan. 1, 2019, SME J and SME K each acquired 25% of the equity of
entities C, F, and N for P10,000, P15,000 and P28,000, respectively. J and K
have joint control over the strategic financial and operating decisions of
entities C, F and N. Transaction costs of 1% of the purchase price of the
shares were incurred by J and K.
On Jan. 2, 2019, entity C declared and paid dividends of P1,000 for the
year ended 2018. On Dec. 31, 2019, entity F declared a dividend of P8,000
for the year ended 2019. The dividend declared by F was paid in 2020.
For the year ended Dec. 31, 2019, entities C and F recognized profit of
respectively P5,000 and P18,000. However, entity N recognize a loss of
P20,000 for that year. Published price quotations do not exist for the
shares of entities C, F and N. Using appropriate valuation techniques, J and
K determined the fair value of each of their investments in entities C, F and
N at Dec. 31, 2019 as P13,000, P29,000 and P15,000, respectively. Costs
to sell are estimated at 5 per cent of the fair value of the investments.
Neither J and K prepares consolidated financial statements because
they do not have any subsidiaries. SME J measures its investments in
jointly controlled entities using the cost model and SME K using the fair
value model.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
In the accounting records, prepare:
1. SME J (cost model), the journal entry on Jan. 1, 2019 to recognize the
acquisition of investments in jointly controlled entities.
2. SME K (fair value model), the journal entry on Jan. 1, 2019 to
recognize the acquisition of investments in jointly controlled entities.
3. SME J (equity method), the journal entry on Jan. 1, 2019 to recognize
the acquisition of investments in jointly controlled entities.
transaction costs incurred to acquire the investments in jointly
controlled entities.
recognize the transaction costs incurred to acquire the investments
in jointly controlled entities.
6. SME J (equity method), the journal entry on Jan. 1, 2019 to recognize
the transaction costs incurred to acquire the investments in jointly
controlled entities.
7. SME J (cost model), the journal entry on Jan. 2, 2019 to recognize
dividends received from entity C.
recognize dividends received from entity C.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
9. SME J (equity method), the journal entry on Jan. 2, 2019 to
10.SME J (cost model), the journal entry on Dec. 31, 2019 to
recognize dividend receivable from entity F.
11.SME K (fair value model), the journal entry on Dec. 31, 2019
to recognize dividend receivable from entity F.
12.SME J (equity method), the journal entry on Dec. 31, 2019
to recognize the share of entity C’s profit for the year.
to recognize the share of entity F’s profit for the year.
to recognize the share of entity N’s loss for the year.
16.SME J (cost model), the journal entry on Dec. 31, 2019 to
recognize the impairment of the investment in entity N.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
17.SME K (fair value model), the journal entry on Dec.

31, 2019 to recognize the impairment of the
investment in entity N.
18.SME J (equity method), the journal entry on Dec. 31,
2019 to recognize the impairment of the investment
in entity N.
31, 2019 to recognize the decrease in fair value of
investment in entity N in the year.
31, 2019 to recognize the increase in fair value of
investments in C and F in the year.
ACCTG 133 AFAR 3
Jointly Controlled
Entities
Investment in entity C 10,000

Investment in entity F 15,000
Investment in entity N 28,000
Cash 53,000
2. SME K (fair value model), the journal entry on Jan. 1, 2019 to recognize the

Cash 53,000
3. SME J (equity method), the journal entry on Jan. 1, 2019 to recognize the

Cash 53,000
ACCTG 133 AFAR 3
Jointly Controlled
Entities
4. SME J (cost model), the journal entry on Jan. 1, 2019 to recognize the transaction
costs incurred to acquire the investments in jointly controlled entities.
Investment in entity C 100

Investment in entity F 150
Investment in entity N 280
Cash 530
5. SME K (fair value model), the journal entry on Jan. 1, 2019 to recognize the
transaction costs incurred to acquire the investments in jointly controlled entities.
Profit or loss 530

Cash 530
6. SME J (equity method), the journal entry on Jan. 1, 2019 to recognize the
transaction costs incurred to acquire the investments in jointly controlled entities.

Investment in entity F 150
Investment in entity N 280
Cash 530
ACCTG 133 AFAR 3
Jointly Controlled
Entities
7. SME J (cost model), the journal entry on Jan. 2, 2019 to
Cash 250
Profit or loss 250
8. SME K (fair value model), the journal entry on Jan. 2, 2019

to recognize dividends received from entity C.
Cash 250
Profit or loss 250
9. SME J (equity method), the journal entry on Jan. 2, 2019 to

Cash 250
ACCTG 133 AFAR 3
Jointly Controlled
Entities
10. SME J (cost model), the journal entry on Dec. 31, 2019 to
recognize dividend receivable from entity F.
Dividend receivable 2,000

Profit or loss 2,000
11. SME K (fair value model), the journal entry on Dec. 31,
2019 to recognize dividend receivable from entity F.

12. SME J (equity method), the journal entry on Dec. 31, 2019

ACCTG 133 AFAR 3
Jointly Controlled
Entities
to recognize the share of entity C’s profit for the year.

to recognize the share of entity F’s profit for the year.

to recognize the share of entity N’s loss for the year.

ACCTG 133 AFAR 3
Jointly Controlled
Entities
16. SME J (cost model), the journal entry on Dec. 31, 2019 to
recognize the impairment of the investment in entity N.

17. SME K (fair value model), the journal entry on Dec. 31,
2019 to recognize the impairment of the investment in entity
N.
No entry required
to recognize the impairment of the investment in entity N.
Profit or loss 9.030

ACCTG 133 AFAR 3
Jointly Controlled
Entities
19. SME K (fair value model), the journal entry on Dec.
31, 2019 to recognize the decrease in fair value of
investment in entity N in the year.

20. SME K (fair value model), the journal entry on Dec.

31, 2019 to recognize the increase in fair value of
investments in C and F in the year.

Investment in enity F 14,000

PFRS 11-Joint Arrangements

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PFRS 11-Joint Arrangements

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PFRS 11- JOINT ARRANGEMENTS

1. Define a J.A. and state its characteristics.

• The parties are bound by a

The contractual arrangement deals with matters such as:

o The activity, duration and reporting obligations of the

A party to a joint arrangement – an entity

50% 30% 20%

50% 25% 25%

35% 35% 30%

JOINT VENTURE JOINT OPERATION

Parties or Joint Venturers Parties or Joint Operators

Parties (joint venturers) have Parties (joint operators) have

Joint Venture OR Joint Operation

A separately identifiable financial structure

 Its assets (+its share on any assets held jointly)

 cash due or from the participant upon completion of the

Answer: Joint Operation

A and B agreed to combine their operations, resources and expertise to

Answer: Joint Operation

A and B entered into a joint agreement to form Alphabets Corporation which

Each party shall have 50% ownership interest in Alphabets Corporation.

Answer: Joint Venture

Completed Joint Operations

Dec. 1. K make cash purchase of 57,000.00

1. The net profit of the joint arrangement

2. The share of Santos in the joint

3. The cash settlement received by Santos

1. The joint arrangement Profit or Loss on October 1, 2012

2. The distribution of the arrangement profit or (loss) on

 Results of discontinued operations

 Other comprehensive income

+ Initial investment recorded at cost

PURCHASE: (at cost)

Investment in Associates 500,000

RECEIVED DIVIDENDS: ( 50,000 *30%)

Investment in Associates 30,000

end balance 515,000

1. What is the investment in Basket Company balance in Ace’s

ANSWER: (90,000 x 40%) = 36,000 -16,400 = 19,600

1. On December 31, 2015, what is the investment in

3. Assuming that the Goldman Company’s ownership structure is as

Profit in JV, 2019 1,000,000

Investment in joint venture 158,000

ABC Co. owns 20% of JV and uses the equity method to

Profit of JV, 2019 1,000,000

Dec 31, 2019

 Downstream Transaction- eliminate

 Upstream Transaction- eliminate

Investment in joint venture 182,000

JV profit in 2020 is P1,200,000

Investment in joint venture 196,400

JV profit in 2020 is P1,200,000

Use the same information from the previous problem

PFRS for SMEs

Joint Venture for SMEs

It is a contractual arrangement whereby two or

Joint Venture for SMEs

Forms of Joint Venture:

1. Jointly Controlled Operations