IFRS 11- Joint Arrangements: A Review of Literature on Migration from IAS 31 to IFRS 11

Abstract

The transition from IAS 31- Interests in Joint Ventures to IFRS 11- Joint Arrangements leads to the elimination of the Proportionate Consolidated Method and leaves the users in the jointly controlled arrangement to use only the Equity Method. The decision to change from IAS 31 to IFRS 11 was justified by the IASB that the change would lead to improved comparability of accounting prepared by joint venturers, and there were limitations from the use of the proportionate consolidated method compared to the equity method. Several letters were written to the IASB during the exposure draft stages on the need for IASB to suspend the implementation of IFRS 11, but IASB went ahead. IASB conducted the Effects Analysis and later released IFRS 12 – Disclosure of Interest in other Entities to address some of the concerns raised by stakeholders. Other researchers have conducted several studies to show the benefits of the proportionate consolidation method over the equity method. Our findings from this study revealed that IASB hurriedly implemented IFRS 11 with the primary aim of satisfying convergence with US-GAAP without considering the impacts of the changes on the users. The study recommended that IASB should consider all the feedback during the exposure stage while amending or replacing, or issuing a new standard in the future. Also, the inputs from financial analysts and users should be seriously considered since they regularly use the standards for analysis or preparing their financial statements.