What Is a Joint Venture in Accounting?

A joint venture is a type of joint arrangement in which the parties that have joint control have rights to the net assets of the arrangement. It sits between an associate and a subsidiary in the influence spectrum, and IFRS 11 governs how you classify it.

Joint control and joint arrangements

Joint control is the contractually agreed sharing of control, where decisions about the relevant activities require the unanimous consent of the parties sharing control. IFRS 11 splits joint arrangements into two types:

• Joint operations — the parties have rights to the assets and obligations for the liabilities, and each recognises its own share directly.
• Joint ventures — the parties have rights to the net assets, and each uses the equity method.

How is a joint venture accounted for?

A joint venture is equity accounted under IAS 28: you record the investment at cost, then increase or decrease it by your share of the venture's post-acquisition profits or losses, showing one line in the statement of financial position and one line in profit or loss.

That is the same mechanic as an associate — the difference is the reason for using it: significant influence for an associate, joint control for a joint venture. Examiners want you to name the driver, not just apply the method.

The classic exam trap is confusing a joint venture with a subsidiary and consolidating it in full. Practising these questions and marking them against the official ACCA scheme with The 50% Club shows you whether your classification — and the equity-method working behind it — actually earns the marks.