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IFRS 11

Joint Arrangements

IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements controlled jointly, classifying every joint arrangement as either a joint operation (accounted for by recognising the party's own share of assets, liabilities, revenue and expenses) or a joint venture (accounted for using the equity method under IAS 28). [S1]

Effective 2013-01-01Related: IFRS 10 · IAS 28 · IFRS 12 · IAS 12

Overview

A joint arrangement is an arrangement of which two or more parties have joint control — the contractually agreed sharing of control, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. [S1] Every joint arrangement is classified as either a joint operation (the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement) or a joint venture (the parties have rights to the net assets of the arrangement), based on the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement, and any other relevant facts and circumstances, not merely on whether a separate legal vehicle exists. [S2]

Why it matters

The joint operation versus joint venture classification changes the accounting fundamentally: a joint operator recognises its own share of assets, liabilities, revenue and expenses directly on its own balance sheet and income statement, gross, while a joint venturer recognises only a single net equity-accounted investment line. For capital-intensive Nigerian sectors like oil and gas, where unincorporated joint arrangements between the national oil company and international and indigenous operators are the dominant operating structure, getting this classification right or wrong changes how much of a partner's own balance sheet and income statement genuinely reflects the scale of its actual operations.

Scope

Applies to all entities that are a party to a joint arrangement, whether or not they have joint control of that arrangement (a party without joint control may still need to consider IFRS 11 to determine its interest, or apply IFRS 9 or IAS 28 depending on whether it has significant influence). It does not itself set out specific disclosure requirements, which are instead found in IFRS 12.

Key definitions

term
Joint arrangement
definition
An arrangement of which two or more parties have joint control.
term
Joint control
definition
The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
term
Joint operation
definition
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
term
Joint venture
definition
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
term
Joint operator
definition
A party to a joint operation that has joint control of that joint operation.
term
Joint venturer
definition
A party to a joint venture that has joint control of that joint venture.

Recognition

A joint operator recognises, in relation to its interest in a joint operation, its own assets (including its share of any jointly held assets), its own liabilities (including its share of any jointly incurred liabilities), its revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation, and its own expenses (including its share of any jointly incurred expenses), applying the specific IFRS Standards applicable to those particular assets, liabilities, revenues and expenses, rather than any special IFRS 11 recognition or measurement guidance of its own. A joint venturer recognises its interest as an investment and accounts for it using the equity method under IAS 28, unless the entity is exempt from applying the equity method under that Standard.

Initial measurement

For a joint operation, each of the joint operator's own assets, liabilities, revenue and expenses (including its share of jointly held or incurred items) is measured in accordance with the applicable IFRS for that specific item, exactly as if the joint operator had incurred or acquired it directly, since there is no separate IFRS 11 measurement basis. For a joint venture, the investment is initially measured at cost under IAS 28's equity method.

Subsequent measurement

A joint operator continues to apply the specific Standard relevant to each asset, liability, revenue and expense item it recognises in relation to the joint operation (for example, IAS 16 for its share of jointly held property, plant and equipment, or IAS 37 for its share of jointly incurred provisions). A joint venturer's equity-accounted investment is subsequently adjusted under IAS 28 for its share of the joint venture's profit or loss and other comprehensive income, with the entire carrying amount tested for impairment as a single asset under IAS 36 when objective evidence of impairment exists.

Presentation

A joint operator presents its share of the joint operation's assets, liabilities, revenue and expenses on a line-by-line basis, combined with its own wholly owned assets, liabilities, revenue and expenses, in its own financial statements (a form of proportionate recognition, though IFRS 11 does not use that term). A joint venturer presents its interest as a single line item (investment in joint venture) in its statement of financial position, with its share of the joint venture's profit or loss presented as a single line item in its statement of profit or loss.

Disclosure checklist

  • Significant judgements and assumptions made in determining that an arrangement is jointly controlled, and in classifying it as a joint operation or a joint venture (IFRS 12 disclosure, closely tied to the IFRS 11 classification analysis).
  • For joint operations: the joint operator's share of assets, liabilities, revenue and expenses recognised in relation to its interest, generally evident from the line items in its own financial statements rather than a separate note.
  • For joint ventures: summarised financial information and other disclosures required under IFRS 12 for material joint ventures accounted for under the equity method.
  • The nature of the entity's relationship with joint operations or joint ventures not separately consolidated, including the nature of activities and their strategic purpose.

Practical treatment

The practical discipline is analysing the legal form, contractual terms, and other facts and circumstances of each joint arrangement individually, rather than assuming a structure without a separate legal vehicle is automatically a joint operation, or a structure with one is automatically a joint venture: a separate legal entity is a strong (but not automatically conclusive) indicator of a joint venture, since the entity itself, rather than the parties directly, generally holds the assets and owes the liabilities — unless the contractual terms or other circumstances specifically give the parties rights to the arrangement's assets and obligations for its liabilities, overriding the separate-vehicle presumption. See nigeria_notes for how this classification plays out in the archetypal Nigerian upstream oil and gas joint arrangement structure.

Common mistakes

  • Assuming a joint arrangement with a separate legal vehicle is automatically a joint venture without assessing whether the contractual terms nonetheless give the parties direct rights to assets and obligations for liabilities.
  • Assuming an unincorporated joint arrangement (no separate legal vehicle) is automatically a joint operation without considering unusual contractual terms that could still create a joint venture structure.
  • Applying proportionate consolidation (a method IFRS 11 does not use, having been carried over from IAS 31 for jointly controlled entities) to a joint venture that should instead be equity accounted.
  • Failing to reassess joint arrangement classification when the contractual terms or other facts and circumstances change materially.
  • Recognising a joint operator's share of jointly incurred liabilities only to the extent of its own direct obligations, missing its share of liabilities incurred jointly with the other parties.

CFO checklist

  • Document the joint control assessment and the joint operation versus joint venture classification analysis for every material joint arrangement, referencing the legal form, contractual terms, and other facts and circumstances.
  • For joint operations, ensure the entity's own share of jointly held assets, jointly incurred liabilities, and jointly generated revenue and expenses are recognised line by line using the applicable Standard for each item.
  • For joint ventures, apply the IAS 28 equity method consistently and test the investment for impairment as a single asset when indicators exist.
  • Reassess joint arrangement classification whenever contractual terms are renegotiated or other significant facts and circumstances change.
  • Coordinate with joint arrangement partners on consistent classification conclusions, since misalignment between parties can signal an incomplete analysis on one side.
  • For oil and gas and other extractive sector joint arrangements, confirm classification treats cash call funding, royalty, and production-sharing mechanics correctly as part of the facts and circumstances assessment.

FAQs

q
Our joint arrangement operates through a separate incorporated company — does that make it automatically a joint venture?
a
Not automatically. A separate legal vehicle is a strong indicator that the parties' rights and obligations relate to the net assets of that vehicle (a joint venture), but if the contractual terms specifically give the parties direct rights to the arrangement's assets and direct obligations for its liabilities (overriding the general legal separation the vehicle would otherwise provide), the arrangement can still be a joint operation despite having a separate legal entity.
q
How do we account for our share of an unincorporated joint operation's revenue and costs?
a
You recognise your own share of the joint operation's assets, liabilities, revenue and expenses directly, line by line, in your own financial statements, applying the ordinary IFRS Standard relevant to each specific item (e.g. IAS 16 for your share of jointly held plant, IAS 2 for your share of jointly produced inventory), rather than a single net investment figure.
q
Can we choose to equity account for a joint operation to keep our balance sheet simpler?
a
No. Classification as a joint operation or joint venture is not an accounting policy choice; it depends on the actual structure, contractual terms and other facts and circumstances of the arrangement, and the corresponding accounting treatment (direct recognition of shares of assets/liabilities for a joint operation, or equity accounting for a joint venture) follows automatically from that classification.

Nigeria application notes

Regulatory overlay

IFRS 11 applies in full to Nigerian public interest entities under the FRCN Act 2011 mandate. [S3] Nigeria's upstream oil and gas sector is the archetypal Nigerian setting for IFRS 11 analysis: historically, the bulk of onshore and shallow-water production has been conducted through unincorporated Joint Operating Agreements (JOAs) between NNPC (through its investment arm) and international and indigenous oil companies acting as operator, funded through periodic cash calls in proportion to each party's participating interest, with petroleum ownership shared on the same basis — a structure that, on its facts, is generally analysed as a joint operation rather than a joint venture, since each party has direct rights to its share of the crude oil produced and obligations for its share of costs. [S4][S5]

Tax interaction (Nigeria)

Each party to a Nigerian joint operation is generally assessed for companies income tax separately on its own share of income and allowable deductions from the arrangement, at the standard illustrative rate of 30% (subject to sector-specific rules, incentives, and the small-company exemption where applicable) under the Nigeria Tax Act 2025; the upstream petroleum sector has its own specific royalty, cost-recovery and profit-sharing rules layered on top of this general framework. [S6][S_TAX1][S_TAX2] Persistent partner cash call default (a recurring feature of some Nigerian upstream joint operations, as periodically reported) can also affect the practical recoverability and timing of each party's own share of jointly incurred costs and liabilities, which should be reflected in the joint operator's own impairment and provisioning assessments where relevant. [S4] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, withholding tax categories, government incentive schemes, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, NIPC/NUPRC/CBN guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Nigerian upstream joint operations typically transact substantially in US dollars (crude oil sales, much of operating cost funding, and cash calls), while the Nigerian joint operator partner's own functional currency may be the naira or the US dollar depending on its own primary economic environment; whichever applies, the joint operator retranslates its foreign-currency-denominated share of jointly held monetary assets and jointly incurred monetary liabilities at each closing rate under IAS 21, and naira volatility can materially affect the naira-equivalent reported value of these shares even though the underlying joint operation's dollar-denominated economics are unchanged.

SME practical note

Outside the extractive sector, Nigerian SME and mid-market joint ventures (in manufacturing, real estate, distribution) are more commonly structured through a jointly owned incorporated special purpose company, which is more likely (though again not automatically) to be a joint venture requiring equity accounting rather than a joint operation; Outliers recommends reviewing the actual shareholders' or joint venture agreement terms, not just the presence of a separate legal entity, before concluding on classification for any Nigerian joint arrangement client engagement.

Common Nigerian pitfalls

  • Assuming every Nigerian joint venture with a separate legal vehicle is automatically equity accounted without checking whether the contractual terms actually give parties direct rights to assets and obligations for liabilities.
  • Failing to reflect partner cash call default risk in a joint operator's own impairment and provisioning assessments for its share of jointly incurred costs.
  • Overlooking the FX translation of a joint operator's own share of foreign-currency-denominated jointly held assets and jointly incurred liabilities.
  • Conflating NUPRC's sector-specific regulatory oversight of joint operating agreements with the IFRS 11 accounting classification analysis, which are related but distinct exercises.

FRC pronouncements

No FRCN pronouncement specific to IFRS 11 classification has been identified; the relevant Nigerian regulatory context for upstream joint arrangements is primarily the Nigerian Upstream Petroleum Regulatory Commission's (NUPRC) sector-specific oversight of joint operating agreements and cash call compliance, operating alongside FRCN's general IFRS compliance mandate. [S3][S4]

Worked examples

Recognising a joint operator's share of jointly held assets and jointly incurred liabilities

A Nigerian indigenous oil company holds a 40% participating interest in an unincorporated joint operation with an international operator holding the remaining 60%. The joint operation's total jointly held production facility has a cost of ₦500,000,000, and jointly incurred decommissioning liabilities are estimated at ₦80,000,000. Each party recognises its own share directly.

Facts

Workings

Nigerian company's share of the production facility: 500,000,000 x 40% = 200,000,000

Nigerian company's share of the decommissioning liability: 80,000,000 x 40% = 32,000,000

Journal entries

Recognise the joint operator's own 40% share of the jointly held production facility and jointly incurred decommissioning liability, applying IAS 16 and IAS 37 respectively to each item.

AccountDr (₦)Cr (₦)
Property, plant and equipment – share of jointly held facility200,000,000
Decommissioning provision – share of jointly incurred liability32,000,000
Cash / payables (balance of funding for the share of the asset)168,000,000

Classifying a jointly owned incorporated entity as a joint venture

Two Nigerian manufacturing companies establish a jointly owned incorporated company to operate a shared warehousing facility, each holding 50% of the shares, with no contractual terms overriding the separate legal personality of the entity; the parties have rights only to their share of the entity's net assets (e.g. dividends), not to specific identified assets or direct obligations for specific liabilities.

Facts

Workings

Since the arrangement operates through a separate legal vehicle and the contractual terms do not give the parties direct rights to assets or direct obligations for liabilities, this is classified as a joint venture, not a joint operation.

Each party accounts for its 50% interest using the equity method under IAS 28, not by recognising a direct share of the warehousing company's individual assets and liabilities.

Sources & citations

  1. [S1]IFRS 11 Joint Arrangements — IFRS Foundationaccessed 2026-07-18
  2. [S2]IFRS 11 Joint Arrangements — IFRS in Brief — Moore Globalaccessed 2026-07-18
  3. [S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
  4. [S4]NNPC - $3.4bn Saved Through Contract Restructuring, N19.5tn Remitted to Federation in 14 Months — allAfrica.comaccessed 2026-07-18
  5. [S5]National Oil Company Profile: NNPC — Natural Resource Governance Instituteaccessed 2026-07-18
  6. [S6]Nigeria - Corporate - Taxes on corporate income — PwC Worldwide Tax Summariesaccessed 2026-07-18
  7. [S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
  8. [S_TAX2]Nigeria's 2025 Tax Reform Acts Explained: Key Changes — Baker Tilly Nigeriaaccessed 2026-07-18
Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)