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Exposure Draft of Accounting for Acquisitions of Interests in Joint Operations (Amendments to Indian Accounting Standard (Ind AS) 111, Joint Arrangements (Corresponding to Amendments to IFRS 11) (Comments to be received by September 15, 2014)
August, 25th 2014
                                raft
                      Exposure Dr


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Accounting for          s of Inte
                uisitions               n Joint Operatio
                                erests in       O      ons
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     (Amend                    J
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                                     Ar     ments)




                   r Comments: Se
      (Last Date for                  er 15, 20
                                eptembe       014)




                            I
                            Issued by
                   counting Standar
                 Acc                      d
                                  rds Board

        The Institute       rtered Ac
                    e of Char       ccountants of India
                                                               Exposure Draft


    Accounting for Acquisitions of Interests in Joint Operations
                           (Amendments to Ind AS 111, Joint Arrangements)


 Following is the Exposure Draft of Accounting for Acquisitions of Interests in Joint Operations
(Amendments to Ind AS 111) issued by the Accounting Standards Board of The Institute of
Chartered Accountants of India, for comments. The Board invites comments on any specific
aspect of the Exposure Draft. Comments are most helpful if they indicate the specific paragraph
or group of paragraphs to which they relate, contain a clear rationale and, where applicable,
provide a suggestion for alternative wording.

Comments should be submitted in writing to the Secretary, Accounting Standards Board, The
Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha
Marg, New Delhi 110 002, so as to be received not later than September 15, 2014. Comments
can also be sent by email to commentsasb@icai.in

(The Exposure Draft of the Indian Accounting Standard includes paragraphs set in bold type and
plain type, which have equal authority. Paragraphs in bold type indicate the main principles.
(This Exposure Draft of the amendment to the Indian Accounting Standard should be read in the
context of its objective and the Preface to the Statements of Accounting Standards1)


Question for Comments

1. The amendment requires the principles of accounting for business combinations contained in
   Ind AS 103 to be applied except to the extent it conflicts with this standard for all
   acquisitions of interests in joint operations that satisfy the definition of business contained in
   Ind AS 103 irrespective of whether the acquisition is initial or subsequent? This appears to
   suggest that Goodwill/Capital Reserve should be calculated at the time of each acquisition,
   whether initial or subsequent (Refer paragraph 21A). This would be contrary to the principle
   contained in Ind AS 110, Consolidated Financial Statements, in Paragraph B96 that
   Goodwill/Capital Reserve is recognized only at the time of initial acquisition and not for
   subsequent acquisitions on the premise that once an entity obtains control, any further
   acquisition of interest is a transaction with owners. In is agreed that the same premise should
   hold good in case of joint operations also as further acquisition of interests in joint operations
   is a transaction with owners and, therefore, should not give rise to Goodwill or Capital
                                                            
1
  Attention is specifically drawn to paragraph 4.3 of the Preface, according to which accounting standards are 
intended to apply only to items which are material 
     Reserve. Do you agree with the proposition that further acquisition of interests in joint
     operation is a transaction with owners? Why or Why not?







Paragraph 21A is added. Paragraphs 20­21 have been included for ease of reference but are not
amended. New text is underlined.


Joint operations

20      A joint operator shall recognise in relation to its interest in a joint operation:

        (a)    its assets, including its share of any assets held jointly;
        (b)    its liabilities, including its share of any liabilities incurred jointly;
        (c)    its revenue from the sale of its share of the output arising from the joint
               operation;
        (d)    its share of the revenue from the sale of the output by the joint operation;
               and
        (e)    its expenses, including its share of any expenses incurred jointly

21      A joint operator shall account for the assets, liabilities, revenues and expenses relating to
        its interest in a joint operation in accordance with the Ind ASs applicable to the particular
        assets, liabilities, revenues and expenses.

21A     When an entity acquires an interest in a joint operation in which the activity of the joint
        operation constitutes a business, as defined in Ind AS 103, it shall apply, to the extent of
        its share in accordance with paragraph 20, all of the principles on business combinations
        accounting in Ind AS 103, and other Ind ASs, that do not conflict with the guidance in
        this Ind AS and disclose the information that is required in those Ind ASs in relation to
        business combinations. This applies to the acquisition of both the initial interest and
        additional interests in a joint operation in which the activity of the joint operation
        constitutes a business. The accounting for the acquisition of an interest in such a joint
        operation is specified in paragraphs B33A­B33D.


In Appendix B, the main heading before paragraph B34 is amended and paragraphs B33A­B33D
and their related heading are added. New text is underlined.


Financial statements of parties to a joint arrangement (paragraphs 21A­22)

Accounting for acquisitions of interests in joint operations

B33A When an entity acquires an interest in a joint operation in which the activity of the joint
     operation constitutes a business, as defined in Ind AS 103, it shall apply, to the extent of
        its share in accordance with paragraph 20, all of the principles on business combinations
        accounting in Ind AS 103, and other Ind ASs, that do not conflict with the guidance in
        this Ind AS and disclose the information required by those Ind ASs in relation to business
        combinations. The principles on business combinations accounting that do not conflict
        with the guidance in this Ind AS include but are not limited to:

        (a)     measuring identifiable assets and liabilities at fair value, other than items for
                which exceptions are given in Ind AS 103 and other Ind ASs;

        (b)     recognising acquisition-related costs as expenses in the periods in which the costs
                are incurred and the services are received, with the exception that the costs to
                issue debt or equity securities are recognised in accordance with Ind AS 32
                Financial Instruments: Presentation and IFRS 9;2

        (c)     recognising deferred tax assets and deferred tax liabilities that arise from the
                initial recognition of assets or liabilities, except for deferred tax liabilities that
                arise from the initial recognition of goodwill, as required by Ind AS 103 and Ind
                AS 12 Income Taxes for business combinations;

        (d)     recognising the excess of the consideration transferred over the net of the
                acquisition-date amounts of the identifiable assets acquired and the liabilities
                assumed, if any, as goodwill; and

        (e)     testing for impairment a cash-generating unit to which goodwill has been
                allocated at least annually, and whenever there is an indication that the unit may
                be impaired, as required by Ind AS 36 Impairment of Assets for goodwill acquired
                in a business combination.

B33B Paragraphs 21A and B33A also apply to the formation of a joint operation if, and only if,
     an existing business, as defined in Ind AS 103, is contributed to the joint operation on its
     formation by one of the parties that participate in the joint operation. However, those
     paragraphs do not apply to the formation of a joint operation if all of the parties that
     participate in the joint operation only contribute assets or groups of assets that do not
     constitute businesses to the joint operation on its formation.

B33C A joint operator might increase its interest in a joint operation in which the activity of the
     joint operation constitutes a business, as defined in Ind AS 103, by acquiring an
     additional interest in the joint operation. In such cases, previously held interests in the
     joint operation are not remeasured if the joint operator retains joint control.

B33D Accounting specified in paragraphs B33A and B33C do not apply for the the acquisition
     of an interest in a joint operation when the parties sharing joint control, including the
     entity acquiring the interest in the joint operation, are under the common control of the
                                                            
2
  If an entity applies these amendments but does not yet apply IFRS 9, the reference in these amendments
    to IFRS 9 shall be read as a reference to IAS 39 Financial Instruments: Recognition and Measurement.
 
same ultimate controlling party or parties both before and after the acquisition, and that
control is not transitory. For such transactions, accounting specified in Appendix C of Ind
AS 103 shall be applicable.
Appendix 1
Comparison with IFRS 11, Joint Arrangements
Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is
only to bring out the major differences, if any, between Indian Accounting Standard(Ind AS) 111 and the
corresponding International Financial Reporting Standard (IFRS) 11, Joint Arrangements issued by the
International Accounting Standards Board:






....

5.     Paragraph B33D refer to the accounting specified in Appendix C `Business Combinations
       under Common Control' of Ind AS 103 for the acquisition of an interest in a joint
       operation when the parties sharing joint control, including the entity acquiring the interest
       in the joint operation, are under the common control of the same ultimate controlling
       party or parties both before and after the acquisition, and that control is not transitory.
       Whereas, IFRS 11 scope out the same as IFRS 3, Business Combination does not deal
       with business combination under common control.



56.    The transitional provisions given in paragraph numbers C2-C13 of Appendix C in IFRS
       11 have not been given in Ind AS 111, since all transitional provisions related to Indian
       ASs, wherever considered appropriate, have been included in Ind AS 101, First-time
       Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption
       of International Financial Reporting Standards. In order to maintain consistency with
       paragraph numbers of IFRS 11, the paragraph numbers are retained in Ind AS 111.

 
 
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