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(Last Date for er 15, 20
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Issued by
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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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