SFRS(I) 11 establishes principles for financial reporting by parties to a joint arrangement — an arrangement of which two or more parties have joint control. It classifies joint arrangements into two types based on the rights and obligations of the parties, and prescribes the accounting for each. It is the Singapore equivalent of IFRS 11 under IFRS, and is in substance IFRS 11 as applied in Singapore.
Objective and scope
The objective is to establish principles for financial reporting by entities that have an interest in arrangements controlled jointly. A joint arrangement is an arrangement of which two or more parties have joint control; it has two characteristics — the parties are bound by a contractual arrangement, and that arrangement gives two or more of them joint control.
Joint control
Joint control is the contractually agreed sharing of control, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Control is shared contractually, and decisions about the activities that significantly affect returns cannot be made by any one party alone. If a single party can direct the relevant activities alone, there is no joint control (and the arrangement may be a subsidiary under SFRS(I) 10).
The two types of joint arrangement
SFRS(I) 11 classifies every joint arrangement as either a joint operation or a joint venture, determined by the rights and obligations of the parties, not merely the legal form.
A joint operation is one whereby the parties with joint control (the joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement — direct rights and obligations in respect of the underlying items.
A joint venture is one whereby the parties with joint control (the joint venturers) have rights to the net assets of the arrangement — an interest in the net outcome, not direct rights to individual assets and obligations.
Assessing the classification requires considering the structure (whether through a separate vehicle), the legal form of any separate vehicle, the terms of the contractual arrangement, and other relevant facts. A separate vehicle does not automatically make an arrangement a joint venture.
Accounting for each type
A joint operator recognises, in relation to its interest in a joint operation: its assets (including its share of any held jointly); its liabilities (including its share of any incurred jointly); its revenue from the sale of its share of the output; its share of the revenue from the sale of output by the joint operation; and its expenses (including its share of any incurred jointly) — its own share of the assets, liabilities, revenues, and expenses, line by line, with no separate single-line investment.
A joint venturer recognises its interest in a joint venture as an investment and accounts for it using the equity method in accordance with SFRS(I) 1-28 — initially at cost and adjusted thereafter for the venturer's share of the joint venture's profit or loss and OCI. Proportionate consolidation is not permitted for joint ventures.
A worked example
Two Singapore companies enter a contractual arrangement to jointly control a project, with all decisions about its relevant activities requiring their unanimous consent:
| If the arrangement gives the parties… | Type | Accounting |
|---|---|---|
| Rights to the assets and obligations for the liabilities | Joint operation | Recognise own share of assets, liabilities, revenues, and expenses (line by line) |
| Rights only to the net assets (e.g. via a separate company) | Joint venture | Single investment, equity method (no proportionate consolidation) |
They have joint control. If the arrangement gives each party direct rights to the project's assets and direct obligations for its liabilities, it is a joint operation, and each company recognises its share of the assets, liabilities, revenues, and expenses. If instead it is structured through a separate company whose legal form gives the parties rights only to its net assets, it is a joint venture, and each company recognises a single investment accounted for using the equity method — not proportionate consolidation.
How SFRS(I) 11 relates to IFRS
SFRS(I) 11 is identical to IFRS 11 under IFRS — the same definition of joint control (unanimous consent over relevant activities), the same two-way classification based on rights and obligations, the same line-by-line accounting for joint operations, and the same requirement to equity-account joint ventures (with proportionate consolidation prohibited). An entity familiar with IFRS 11 will find SFRS(I) 11 to be the same standard.
Common pitfalls
Recurring issues include concluding there is joint control where decisions do not actually require unanimous consent of the controlling parties; classifying an arrangement by its legal form alone rather than by the parties' rights and obligations (a separate vehicle does not automatically make it a joint venture); using proportionate consolidation for a joint venture (not permitted — the equity method applies); and failing to recognise the appropriate share of assets, liabilities, revenues, and expenses for a joint operation.
Why this is cleaner on a unified system
Accounting for joint arrangements — recognising the share of a joint operation's assets, liabilities, revenues, and expenses, or equity-accounting a joint venture — depends on reliable, connected information about the arrangement's underlying results and the party's interest in them. When the relevant data and the ledger sit in one connected system, applying the correct treatment for each type of arrangement, and producing the resulting line-by-line recognition or equity-method entries, is more straightforward than assembling the figures from separate records maintained outside the accounts.
This article is a detailed educational summary of SFRS(I) 11 in plain language. It is not a substitute for the full text of the standard. Accounting standards are amended from time to time; always verify the current, authoritative text of SFRS(I) 11 as issued by the Singapore Accounting Standards Council before relying on it, and consult a qualified professional accountant for application to your specific circumstances.