IFRS 11 Joint Arrangements sets the principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (IFRS 11.1), and it applies to every entity that is a party to a joint arrangement (IFRS 11.3). Each party determines the type of arrangement from its rights and obligations and accounts for those rights and obligations accordingly (IFRS 11.2). The answer is one of two: a joint operation, where the party recognises its share of assets, liabilities, revenue and expenses directly, or a joint venture, which appears as a single investment under the equity method.
What is a joint arrangement?
A joint arrangement is an arrangement of which two or more parties have joint control (IFRS 11.4). It has two characteristics: the parties are bound by a contractual arrangement, and that arrangement gives two or more of them joint control (IFRS 11.5). The contractual arrangement is often, but not always, in writing, and statutory mechanisms can create enforceable arrangements on their own or together with contracts (IFRS 11.B2). It usually covers the purpose and duration of the activity, how the board is appointed, the decision-making process, the contributions required, and how assets, liabilities, revenues and expenses are shared (IFRS 11.B4).
Joint control: a two-step assessment
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control (IFRS 11.7). It is assessed in two steps:
- Do all the parties, or a group of them, control the arrangement collectively under the IFRS 10 definition of control, meaning they must act together to direct the relevant activities? (IFRS 11.B5)
- If so, do decisions about the relevant activities require the unanimous consent of those parties? (IFRS 11.B6)
In a joint arrangement no single party controls on its own, and any party with joint control can prevent the others from controlling (IFRS 11.10). Two examples from the Standard (IFRS 11.B8):
| Voting rights | Threshold for decisions | Result |
|---|---|---|
| A 50%, B 30%, C 20% | 75% | A and B have joint control: no decision can be made without both |
| A 50%, B 25%, C 25% | 75% | Not a joint arrangement unless the contract specifies which parties must agree unanimously, because more than one combination reaches the threshold |
Three further points:
- Unanimous consent over decisions that give only protective rights does not make a party one with joint control (IFRS 11.B9).
- Dispute-resolution clauses such as arbitration do not prevent joint control (IFRS 11.B10).
- An arrangement can be joint even if not all its parties have joint control; the Standard distinguishes parties with joint control from parties that merely participate (IFRS 11.11).
The assessment is revisited when facts and circumstances change (IFRS 11.13).
Classification: joint operation or joint venture?
Classification depends on the parties' rights and obligations (IFRS 11.14):
- Joint operation: the parties with joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. They are joint operators (IFRS 11.15).
- Joint venture: the parties with joint control have rights to the net assets of the arrangement. They are joint venturers (IFRS 11.16).
Classification takes judgement, considering the structure and legal form of the arrangement, the terms of the contractual arrangement and, when relevant, other facts and circumstances (IFRS 11.17). The steps:
- Structure. An arrangement not structured through a separate vehicle is a joint operation (IFRS 11.B16). One structured through a separate vehicle can be either type (IFRS 11.B19).
- Legal form. If the legal form does not separate the parties from the vehicle, so that its assets and liabilities are the parties' own, the arrangement is a joint operation (IFRS 11.B24). If it does separate them, as an incorporated entity usually does, the initial indication is a joint venture, but the contractual terms and other facts can override it (IFRS 11.B23).
- Contractual terms. If the contract gives the parties rights to the assets and obligations for the liabilities, the arrangement is a joint operation and no other facts need be considered (IFRS 11.B28). A contract can modify the features of an incorporated entity enough to make the arrangement a joint operation (IFRS 11.B26).
- Other facts and circumstances. If the arrangement's activities are primarily designed to provide output to the parties, this indicates that they have rights to substantially all the economic benefits of its assets (IFRS 11.B31). If they are substantially the only source of the cash flows that keep it operating, this indicates that they have an obligation for its liabilities. Together, these point to a joint operation (IFRS 11.B32).
The Standard's example: an incorporated entity owned 50:50 makes materials both parties need; they must buy all its output 50:50, it cannot sell to third parties without their approval, and its prices are set to cover its costs. The legal form suggests a joint venture, but these facts make it a joint operation. If it became free to sell to third parties and took on demand, inventory and credit risk, the classification would have to be reassessed (IFRS 11.B32).
Joint operations and joint ventures can coexist under one framework agreement when the parties' rights and obligations differ between its activities (IFRS 11.18), and classification is reassessed when facts change (IFRS 11.19).
Accounting for a joint operation
In relation to its interest, a joint operator recognises (IFRS 11.20):
- its assets, including its share of any assets held jointly;
- its liabilities, including its share of any liabilities incurred jointly;
- its revenue from the sale of its share of the output;
- its share of the revenue from the sale of the output by the joint operation; and
- its expenses, including its share of any expenses incurred jointly.
Each item follows the Standard that applies to it (IFRS 11.21), and the same accounting applies in the operator's separate financial statements (IFRS 11.26). For transactions with the joint operation:
- Selling or contributing assets to it: gains and losses are recognised only to the extent of the other parties' interests (IFRS 11.B34), but losses that evidence a reduction in net realisable value or an impairment are recognised in full (IFRS 11.B35).
- Buying from it: the operator does not recognise its share of the gains and losses until it resells the assets to a third party (IFRS 11.B36).
A party that participates in a joint operation without joint control accounts the same way if it has rights to the assets and obligations for the liabilities; otherwise it follows the Standards that apply to its interest (IFRS 11.23).
Accounting for a joint venture
A joint venturer recognises its interest as an investment and accounts for it using the equity method in IAS 28, unless it is exempt under that Standard (IFRS 11.24). The investment is first recognised at cost; its carrying amount then rises or falls with the investor's share of the investee's post-acquisition profit or loss, is reduced by distributions received, and reflects the investor's share of the investee's other comprehensive income in the investor's own OCI (IAS 28.10). Key IAS 28 rules:
- Goodwill relating to a joint venture is included in the carrying amount of the investment and is not amortised (IAS 28.32).
- Gains from upstream and downstream transactions with the venture are recognised only to the extent of unrelated investors' interests (IAS 28.28).
- Once the investor's share of losses reaches its interest, it stops recognising further losses (IAS 28.38), except to the extent of legal or constructive obligations or payments made on the venture's behalf (IAS 28.39).
- Venture capital organisations, mutual funds and similar entities may elect to measure the investment at fair value through profit or loss under IFRS 9, venture by venture, at initial recognition (IAS 28.18).
A party that participates in a joint venture without joint control applies IFRS 9, unless it has significant influence, in which case it applies IAS 28 (IFRS 11.25). In separate financial statements, an interest in a joint venture is measured at cost, under IFRS 9, or using the equity method (IAS 27.10).
Acquiring an interest in a joint operation that is a business
When an entity acquires an interest in a joint operation whose activity is a business as defined in IFRS 3, it applies, to the extent of its share, all the business combinations principles that do not conflict with IFRS 11, and gives the related disclosures, for both the initial and any additional interests (IFRS 11.21A). These include measuring identifiable assets and liabilities at fair value, expensing acquisition-related costs, recognising deferred taxes, and recognising goodwill and testing the cash-generating unit to which it is allocated for impairment at least annually (IFRS 11.B33A).
- The same applies on the formation of a joint operation if a party contributes an existing business, but not if all contributions are assets that are not businesses (IFRS 11.B33B).
- When a joint operator increases its interest while keeping joint control, its previously held interest is not remeasured (IFRS 11.B33C).
- None of this applies when the parties sharing joint control, including the acquirer, are under the common control of the same ultimate controlling party before and after the acquisition (IFRS 11.B33D).
If a party obtains control of a joint operation that is a business, it is a business combination achieved in stages and the entire previously held interest is remeasured (IFRS 3.42A); see IFRS 3 Business Combinations.
Illustrative example: the same profit, two presentations
Companies A and B share an activity 40:60, and the contract requires their unanimous consent on decisions about the relevant activities. Illustrative figures: the operating asset cost 5,000,000; revenue for the year is 800,000 and expenses, including depreciation, are 300,000.
Case 1, joint operation (no separate vehicle): A recognises its 40% directly: an asset of 2,000,000, revenue of 320,000 and expenses of 120,000, so a profit of 200,000 reaches it through gross line items (IFRS 11.20).
Case 2, joint venture (an incorporated entity with separate legal personality, no terms giving the parties rights to its assets, and no other facts pointing to a joint operation): A paid 2,000,000 for 40%; the entity earns 500,000 and distributes 200,000:
| Line item | Debit | Credit |
|---|---|---|
| Investment in joint venture | 200,000 | |
| Share of profit of joint venture | 200,000 | |
| Cash (40% of the distribution) | 80,000 | |
| Investment in joint venture | 80,000 |
The investment becomes 2,000,000 + 200,000 − 80,000 = 2,120,000 (IAS 28.10). A's profit is the same in both cases, but the presentation differs: gross line items in the first, one investment line and a share of profit in the second.
What has changed in IFRS 11?
- Origin. IFRS 11 was issued in May 2011 to replace IAS 31, and IFRS 12, issued at the same time, replaced its disclosure requirements (IFRS Foundation: IFRS 11).
- Acquisitions of interests in joint operations. The amendment was issued on 6 May 2014 and took effect on 1 January 2016 (IFRS Foundation: project page).
- Previously held interests. Annual Improvements to IFRS Standards 2015–2017 Cycle (December 2017) clarified the accounting when a party that already holds an interest in a joint operation that is a business obtains control or joint control of it (IFRS Foundation: project page). On obtaining control the previously held interest is remeasured (IFRS 3.42A); on obtaining joint control it is not (IFRS 11.B33CA).
- Post-implementation Review. On 20 June 2022 the IASB concluded that IFRS 10, IFRS 11 and IFRS 12 are working as intended and rated none of the matters raised as high or medium priority (IFRS Foundation: PIR page).
- No amendment to IFRS 11 itself appears among the amendments effective from 1 January 2026, or issued but not yet effective at that date, in the 2026 edition list; the list does include consequential amendments to IAS 28 from IFRS 18, effective for annual periods beginning on or after 1 January 2027 (IFRS Foundation: changes in the 2026 edition).
- Fair value option in IAS 28. On 26 June 2026 the IASB issued narrow amendments clarifying which investments in associates and joint ventures are eligible for the fair value option; they take effect when an entity first applies IFRS 18 (IFRS Foundation: news).
- Equity method. In September 2026 the IASB completed its deliberations on the Exposure Draft of a revised IAS 28 (published September 2024) and began balloting. It expects to issue the revised Standard in the first half of 2027, effective 1 January 2029, so it is not yet in force (IFRS Foundation: project page).
How it fits with other Standards
IFRS 11 takes its concept of control from IFRS 10 Consolidated Financial Statements and sends joint venture accounting to IAS 28. Disclosures about joint arrangements, such as their nature, risks and summarised financial information for material joint ventures, belong to IFRS 12 Disclosure of Interests in Other Entities, not IFRS 11.
A practical tool
If your group includes subsidiaries as well as joint arrangements, the Consolidated Financial Statements and Group Trial Balance Merging workbook organises the combine-and-eliminate steps in one file.
Sources
- IFRS Foundation: IFRS 11 Joint Arrangements. References in brackets are to paragraphs of the Standard and its appendices.
- IFRS Foundation: IAS 28 Investments in Associates and Joint Ventures, IAS 27 Separate Financial Statements and IFRS 3 Business Combinations.
- IFRS Foundation: Changes in this edition (2026).
- IFRS Foundation project pages and news: Acquisitions of interests in joint operations, Previously held interests in a joint operation, Post-implementation Review of IFRS 10–12, Equity Method, and the fair value option amendments.