Joint venture
Definition
An arrangement in which the parties with joint control have rights to its net assets. A joint venture is included in the group accounts by the equity method.
Why does it matter in a group?
A joint venture is run by parties that share control, with rights to its net assets. IFRS 11 distinguishes it from a joint operation, where the parties have rights to the assets and obligations for the liabilities and show their own share of each line. A joint venture is included by the equity methodEquity methodA way of including an associate or joint venture: the investment starts at cost and is adjusted each period for the investor's share of the investee's profit or loss and other changes in its net assets.Open the glossary entry, on one line, so it is not consolidated and its balances with the group are not eliminated. It differs from an associateAssociateA company over which an investor has significant influence but not control, usually shown by holding 20 percent or more of the votes. It is included in the group accounts by the equity method.Open the glossary entry in having joint control, not just influence.
A small example
Zenvara and a partner each hold 50 percent of Harbourline. Zenvara invests GBP 2,000,000. Harbourline earns GBP 600,000. Zenvara’s share is 300,000, so its investment becomes GBP 2,300,000.