International Financial Reporting Standards
Effect analysis 2011
Joint Arrangements and
Related Disclosures
The views expressed in this presentation are those of the presenter,
not necessarily those of the IFRS Foundation or the IASB
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Effect analysis – Aspects considered
Joint venture activity (slides 3-4)
Financial statement effects (slides 5-7)
Cost-benefit analysis (CBA) (slide 8)
Convergence with US GAAP (slide 9)
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Joint venture activity:
frequency, countries, industries1
3
Yearly frequency of JV deals
9000
8,044
7,527
Number of JV deals
8000
7000
6,139
6000
5,193 5,208
5000
5,512
5,540
5,043
4,910
4,296
3000
3,962 3,946
3,759
4000
3,034
3,567
2,501
2,538
2,362
2,102
2000
742
1000
210
0
JV deals by country (1990-2010)
Country
JV deals
United States
Relevance
31,952
37.10%
China
6,078
7.05%
Japan
4,840
5.62%
United Kingdom
3,112
3.61%
Canada
2,610
Australia
India
JV deals by industry (1990-2010)
Industry
JV deals
17,610
20.45%
Software
6,718
7.80%
Wholesale trade: durable goods
5,840
6.78%
Investment and commodity firms
4,980
5.78%
3.03%
Electronic
3,321
3.86%
2,477
2.88%
Telecommunications
2,545
2.95%
2,093
2.43%
Wholesale trade: non-durable goods
2,300
2.67%
Germany
1,541
1.79%
Mining
2,297
2.67%
Malaysia
1,303
1.51%
Oil and gas
2,166
2.51%
Real estate
1,781
2.07%
Russian Federation
Others
Total number of JV deals
914
1.06%
29,215
33.92%
86,135
100.00%
Business services
Relevance
Others
Total number of JV deals
(1): Sources: Thomson Financial SDC Platinum Alliances/Joint Ventures database – Sviatoslav A Moskalev, R Bruce Swensen.
Joint Ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
36,577
42.46%
86,135
100.00%
Joint venture activity: structures2
4
JV deals by form (1990-2010)
Strategic
alliances
Independent
firms
54,567
31,568
86,135
63.4%
36.6%
100.0%
Total number of JV deals
Relative relevance
Total
JV Deals by industry and form - 1990-2010
JV Deals by country and form - 1990-2010
20000
35000
26,228
18000
30000
14,805
16000
Number of JV deals
Number of JV deals
25000
20000
15000
10000
1,505
3,235
5000
1,608
5,724
1,429
4,573
1,605
0
1,873
1,504
737
761
1,048
646
1,332
220
309
895
994
14000
12000
10000
8000
6000
4000
694
2000
0
Industries:
(1) Business services
(2) Software
6,092
(3) Wholesale trade: durable goods
4,740
(4) Investment and commodity firms
3,750
(5) Electronic
(6) Telecommunications
1,975
(7) Wholesale trade: non-durable goods
1,601 1,556 1,208 799
(8) Mining
550
2,805
(9) Oil and gas
626
1,100 1,230 1,346 944
744 1,089 1367 1,231 (10) Real estate
(1)
Independent firms
Strategic alliances
(2)
(3)
(4)
Independent firms
(5)
(7)
Strategic alliances
(2): Sources: Thomson Financial SDC Platinum Alliances/Joint Ventures database – Sviatoslav A Moskalev, R Bruce Swensen.
Joint Ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
(6)
(8)
(9)
(10)
Financial statement effects: current accounting methods3
Accounting method by country
Accounting method by industry
18
16
40
16
34
Number of companies
14
13
Number of companies
35
13
12
10
9
9
8
8
8
7
7
6
6
4
5
6
5
4
6
5
25
18
20
19
15
10
7
8
9
4
5
3
Consumer Markets
Financial Services
2
2
1
Industrial Markets
Information,
Communications and
Entertainment
0
Germany
Hong Kong
6
0
3
France
10
5
4
4
29
30
Italy
Netherlands South Africa
Proportionate Consolidation
Spain
Sweden
Switzerland
UK
Other
Equity Method
(3): Source: KPMG IFRG Limited and Dr Isabel von Keitz. The Application of IFRS: Choices in Practice – December 2006
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Proportionate Consolidation
Equity Method
Infrastructure and
Healthcare
Financial statement effects: overview of the effects
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Financial statement effects: other effects analysed
The Effect analysis document also considers:
• Effects on the entities’ financial statements (ie statement of financial
position, statement of comprehensive income, statement of
changes in equity, statement of cash flows).
• Effect of the accounting change on return on capital and its
components (ie profitability, assets turnover and financial leverage).
• Effects expected on the arrangements analysed during the outreach
which covered different industries.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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Cost-benefit analysis (CBA)
The areas identified as the areas that will represent the highest costs
and benefits for those entities affected by the implementation of
IFRS 11 are as follows:
• Classification of the types of joint arrangement
• Transition provisions
• Additional disclosures
Overall assessment is that the benefits brought by IFRS 11 will
outweigh its related costs.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
8
US GAAP Convergence
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• Differences in the definitions of ‘joint arrangement’ and ‘joint control’ will still
persist.
Corporations
Convergence will increase
but differences will remain for
arrangements whereby the
parties have rights to the
assets and obligations for the
liabilities.
Unincorporated
entities
Accounting for specialised
industries will probably fully
converge. Accounting for the other
industries might not converge.
Joint arrangements
structured through a
separate vehicle
Joint arrangements
not structured
through a separate
vehicle
Accounting for entities’ undivided interests in assets and
liabilities will continue to converge, but there will be no
convergence for specific industries in which the parties
having undivided interests may apply the equity method
under US GAAP.
Questions or comments?
Expressions of individual
views by members of the
IASB and
its staff are encouraged.
The views expressed in this
presentation are those of the
presenter. Official positions
of the IASB on accounting
matters are determined only
after extensive due process
and deliberation.
© 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
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