My student asked me, what is a Joint Venture? Do you know, what is a Joint Venture or a Joint Arrangement? This article is related to circumstances where companies join together to seek a common objective which is called a joint arrangement. Joint Arrangement is joint venture and joint operation altogether. These companies sign contracts which need all companies involved in order to act together, to agree on the major decisions involving what the companies do with regard to specified projects.
The purpose of joint venture or joining together may be for different reasons. Sometimes it is to share costs, or to manage the risk involved in the project.Alternatively, it may be made to give the parties with access to new technology or new markets. These contractual arrangements, if they meet certain conditions are termed as joint arrangements (joint venture and joint operation). The key feature of joint venture is that all the parties involved have joint control over the decision making in relation to the joint arrangement (joint venture and joint operation). I think you will be able say what is a Joint Venture, now!
Joint arrangements (joint venture plus joint operation) are mainly useful when developing new technologies as there are often major risks in terms of final success. Further, entities may choose to join together to interrelate research findings and knowledge regarding their new technology developments
Know that joint arrangements do not require investors to have equal interests in the project. Decision making of the arrangement on a joint control basis is a key element of a joint arrangement (joint venture and joint operation) and requires the common agreement of all parties involved.
This joint arrangement (joint venture plus joint operation) is covered by International Accounting Standard 31 (IAS 31) & IFRS 11, Joint Arrangements, issued by the International Accounting Standards Board (IASB) in May 2011. IFRS 11 deals with both joint ventures and joint operations. Joint Venture accounting has venture, co-venture and a joint bank account. In future, I will discuss more on the Joint Venture accounting with examples, so that the intended visitors will be benefited fro this academic article. Before that I will suggest you to learn exactly what is a Joint Venture really.
Topic: What is a Joint Venture or a Joint Arrangement