In accordance with the "Basic Standard for Enterprise Accounting Standards," the Ministry of Finance issued Enterprise Accounting Standard No. 40 — Joint Arrangements on 1/27/2014, effective as of 7/1/2014.
1. Overview of Guidelines
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the shared control of an arrangement, determined by contract, where decisions about the relevant activities require the unanimous consent of the parties sharing control.
II. Classification of Joint Arrangements
Co-own
A joint arrangement in which the parties that have joint control enjoy rights to the assets and assume obligations for the liabilities of the arrangement. A joint arrangement that is not achieved through a separate vehicle shall be classified as a joint operation.
Joint Venture
A joint arrangement in which the joint venturer has rights only to the net assets of the arrangement. A joint arrangement established through a separate vehicle is typically classified as a joint venture.
3. Accounting Treatment for Participating Parties
Joint operator
- • Confirm assets held individually and share-based assets held jointly
- • Recognize liabilities assumed individually and share of joint liabilities
- • Recognize revenue from the sale of its share of outputs from a joint operation.
- • Recognize expenses incurred individually and allocate a share of expenses from joint operations.
Joint Venture Participants
Investors in a joint venture shall account for their investment in accordance with the Long-term Equity Investments standard, using the equity method.
Regulatory Document Attachment
Accounting Standards for Business Enterprises No. 40 — Joint Arrangements (PDF)