Document ID: chunk:federal_register_of_legislation:F2019C00335:body:0:p32
Version: federal_register_of_legislation:F2019C00335
Segment Type: other
Provision Reference: 
Character Range: 84621–88179

of entity C (ie the loan is a liability of entity C). Companies A and B have separate liabilities, which are their guarantees to repay that loan if entity C defaults during the development and construction phase.
IE51 There are no other facts and circumstances that indicate that the parties have rights to substantially all the economic benefits of the assets of entity C and that the parties have an obligation for the liabilities of entity C. The joint arrangement is a joint venture.
IE52 The parties recognise their rights to the net assets of entity C as investments and account for them using the equity method.

Example 7—Accounting for acquisitions of interests in joint operations in which the activity constitutes a business
IE53 Companies A, B and C have joint control of Joint Operation D whose activity constitutes a business, as defined in AASB 3 Business Combinations.
IE54 Company E acquires company A's 40 per cent ownership interest in Joint Operation D at a cost of CU300 and incurs acquisition-related costs of CU50.
IE55 The contractual arrangement between the parties that Company E joined as part of the acquisition establishes that Company E's shares in several assets and liabilities differ from its ownership interest in Joint Operation D. The following table sets out Company E's share in the assets and liabilities related to Joint Operation D as established in the contractual arrangement between the parties:

                                        Company E's share in the assets and liabilities related to Joint Operation D
Property, plant and equipment                                                                                         48%
Intangible assets (excluding goodwill)                                                                                90%
Accounts receivable                                                                                                   40%
Inventory                                                                                                             40%
Retirement benefit obligations                                                                                        15%
Accounts payable                                                                                                      40%
Contingent liabilities                                                                                                56%

Analysis
IE56 Company E recognises in its financial statements its share of the assets and liabilities resulting from the contractual arrangement (see paragraph 20).
IE57 It applies the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards for identifying, recognising, measuring and classifying the assets acquired, and the liabilities assumed, on the acquisition of the interest in Joint Operation D. This is because Company E acquired an interest in a joint operation in which the activity constitutes a business (see paragraph 21A).
IE58 However, Company E does not apply the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards that conflict with the guidance in this Standard. Consequently, in accordance with paragraph 20, Company E recognises, and therefore measures, in relation to its interest in Joint Operation D, only its share in each of the assets that are jointly held and in each of the liabilities that are incurred jointly, as stated in the contractual arrangement. Company E does not include in its assets and liabilities the shares