An entity set up by a sponsor to accomplish a very specific and limited
Assets transferred to them by their sponsors, SPE can often secure lower cost
debt financing for the sponsor because credit risk is limited to the SPE asset.
The debt proceeds, SPE can then pay the sponsor for the transferred assets.
IFRS 10 requires SPE to consolidate as long as they meet the definition of
control under IFRS 10:
Investor is exposed to or has rights to variable returns with the investee and
has the ability to affect those returns through its power over the investee
1) Power over investee
2) Exposure to rights or variable returns from its involvements
3) Ability to use its power to affect the amount of investor returns
Two types: Joint Operation (JO) & Joint Venture (JV)
Each contributes the use of assets or resources to the new activity but retains
title to and control of these assets and resources.
No new entity created
Have joint control of the arrangement and have rights to the asses, and
obligations for the liabilities relating to the arrangement.
IFRS 11 allows JO for proportional, so basically you report your share of
assets, liabilities, revenue and expense of the JO.
Sales and contribution of assets to JO: recognize gains and losses only to the
extent of the other parties interests. Cannot recognize its share of the gains
or losses on purchase assets until those assets are sold to 3 party.
If signs of impairment than have to recognize loss fully
Parties that have joint control of the arrangement have rights to the net
assets of the arrangement
1 No single venture can control the JA regardless of the value of the assets or
resources it contributed to the JA
IFRS requires JV to use equity method
IAS 16: share of gains can be recognized on non-monetary assets contributed
except whe n1 of the following conditions is present:
1) Significant risks and rewards have not been transferred or gain cannot be
2) Contribution lacks c