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Philippine Public Sector Accounting Standard

(PPSAS)

Scope

Effectivity

Exceptions

An entity shall apply this PPSAS for annual financial statements covering periods beginning on January 1, 2014

venturers’ interest in jointly controlled held by mutual funds

NGA's

LGU's

Disclosures

4. A venturer shall disclose the method it uses to recognize its interests in jointly controlled entities. (Par. 64)

unit trust

1. A venturer shall disclose: (Par. 61)

(a) The aggregate amount of the following contingent liabilities, unless the possibility of any outflow in settlement is remote, separately from the amount of other contingent liabilities:

2. A venturer shall disclose the aggregate amount of the following commitments in respect of its interests in joint ventures separately from other commitments: (Par.62)

(i) Any contingent liabilities that the venturer has incurred in relation to its interests in joint ventures and its share in each of the contingent liabilities that have been incurred jointly with other venturers;

(ii) Its share of the contingent liabilities of the joint ventures themselves for which it is contingently liable; and

(iii) Those contingent liabilities that arise because the venturer is contingently liable for the liabilities of the other venturers of a joint venture; and

(a) Any capital commitments of the venturer in relation to its interests in joint ventures and its share in the capital commitments that have been incurred jointly with other venturers; and

(b) Its share of the capital commitments of the joint ventures themselves.

Disclosure

requirements

(b) A brief description of the following contingent assets and, where practicable, an estimate of their financial effect, where an inflow of economic benefits or service potential is probable:

Identify accounting methods used and

Learning Objectives

(i) Any contingent assets of the venturer arising in relation to its interests in joint ventures and its share in each of the contingent assets that have arisen jointly with other venturers; and

(ii) Its share of the contingent assets of the joint ventures themselves.

3. A venturer shall disclose a listing and description of interests in significant joint ventures and the proportion of ownership interest held in jointly controlled entities.

Differentiate joint ventures from its different forms

The venturer is not required to apply proportionate consolidation or equity method to an interest if:

similar entities including investment linked insurance funds

A

interest is acquired within twelve months from acquisition and that management is actively seeking a buyer; (IPSAS 29)

(a) the sale is in process at the reporting date,

(b) there is no reason to believe that it will not be completed shortly after the reporting date.

  • One or more assets are shared and jointly controlled
  • Venturer records joint venture transactions in its own books of account

B

allowing a controlling entity that also has an interest in a jointly controlled entity not to present consolidated financial statements is applicable; or

  • No legal entity formed
  • Operations are jointly controlled
  • Venturer records joint venture transactions in its own books of account

All of the following apply:

  • No legal entity formed

  • A wholly-owned controlled entity and users of financial statements
  • equity method are unlikely to exist
  • information needs are met by the controlling entity’s consolidated financial statements
  • The venturer neither filed, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organization

C

  • The venturer’s debt or equity instruments are not traded in a public market
  • produces consolidated financial statements available for public use that comply with IPSASs.

GOCC's

  • Involves the establishment of a corporation, partnership or other entity

A venturer with an interest in a jointly controlled entity is exempted from paragraphs 35 (proportionate consolidation) and 43 (equity method) when it meets the following conditions:

  • Operates the same way as other entities, except that a binding arrangement between the venturers established a joint control over the activity of the other
  • controls the assets of the joint venture, incurs liabilities and expenses and earns revenue
  • may enter into contracts in its own name and raise finance for the purposes of the joint venture activity.

PPSAS 8

Interests in Joint Ventures

is the agreed sharing of control over an activity by a binding arrangement.

is a party to a joint venture and has joint control over that joint venture.

is a binding arrangement whereby two or more parties are committed to undertake an activity that is subject to joint control.

is the power to participate in the financial and operating policy decisions of an activity but is not control or joint control over those policies.

Definition

Proportionate Consolidation

Reporting of the Joint Venture interests in the Financial Statements

Accounting for Interests in Joint Venture

A venturer shall recognize its interest in a jointly controlled entity using proportionate consolidation or the alternative method described in paragraph 43 (equity method). When proportionate consolidation is used, one of the two reporting formats shall be used. (Par. 35)

a. share in jointly controlled assets

b. liabilities incurred

Jointly Controlled

Assets

a. assets , liabilities, and equity

c. share in joint liabilities

d. revenue, share in expenses

b. revenues and expenses

e. expenses incurred

Jointly Controlled

Entities

Jointly Controlled

Operations

Reporting format for Proportionate Consolidation

a. assets controlled, liabilities incurred

b. expenses incurred, share in revenue earned

Proportionate Consolidation

1. The venturer may combine its share of each of the assets, liabilities, revenue, and expenses of the jointly controlled entity with similar items, line by line, in its financial statements.

share of each of the assets, liabilities, revenue and expenses of a jointly controlled entity is combined line by line with similar items in the venturer’s financial statements or reported as separate line items in the venturer’s financial statements.

2. The venturer may include separate line items for its share of the assets, liabilities, revenue, and expenses of the jointly controlled entity in its financial statements.

Equity Method

  • Investment initially recognized at cost
  • Carrying amount is increased or decreased to recognize the share in surplus or deficit

The use of the equity method is supported by:

Operators of Joint Ventures

Operators or managers of a joint venture shall account for any fees in accordance with IPSAS 9, Revenue from Exchange Transactions. (Par. 59)

a. Those who argue that it is inappropriate to combine controlled items with jointly controlled items

OPERATOR does not control the joint venture but acts within the financial and operating policies that have been agreed by the venturers. However, if the operator has the power to govern the financial and operating policies of the activity, it controls the joint venture and not considered as joint venturer.

b. Those who believe that venturers have significant influence, rather than joint control, in a jointly controlled entity.

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