PSAK 12 : PART OF PARTICIPATION ON JOINT VENTURE

Created By : Jessy Astrid Fouretna (120110100045) Utari Nurfajri Arifa (120110100074) Ratna Saridewi (120110100103)

Faculty of Economics and Business Universitas Padjadjaran 2012

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CHAPTER I INTRODUCTION
1.1. Executive Summary Joint venture is a contractual arrangement whereby two or more parties carry out economic activities subject to joint control. Joint control is a contractual agreement to share control over an economic activity, and there only when financial and operational decisions that related with strategic activities requires absolute consensus of the parties sharing control (venturers). PSAK 12 applies to the accounting part of participation in joint ventures and the reporting of assets, liabilities, income and expenses in the financial statements of joint ventures of venturers and investors, regardless of the underlying structure or form joint venture activity done. However, this statement does not apply for the participation of the venturer in jointly controlled entities held by: (a)Venture capital organizations, or (b)Mutual funds, unit trusts and similar entities including investment-linked insurance funds It is were determined at initial recognition at fair value through profit or loss or cated classified as held for trading and accounted for in accordance with SFAS 55 (revised 2006) Financial Instruments: Recognition and Measurement. These investments are measured at fair value in accordance with SFAS 55, changes in fair value recognized in profit or loss in the period of change. Venturer who has a participation makes the disclosures required by paragraphs 54 and 55. 1.2. Problem Identification 1. What is the definition of Joint Venture ? 2. What are the general characteristics of whole Joint Venture ? 3. What are the forms of Joint Venture ? 4. What transactions are made between Venturer and Joint Venture ? 5. How to define participations report section of joint venture on investors financial statement ? 6. What is Joint Venture operator ? 7. How to disclose about Joint Venture ? 1.3. Writing Objectives Each creation possess definite purpose. Likewise of this writing as for its purpose is as follows: Fulfilled Paper Assignment of Special Topics of Accounting Courses

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In this case, our group (group 10) as authors attempt to fulfill the duties from our Special Topics of Accounting lecturer, Mrs. Evita Puspitasari. We try to meet our responsibility as her protg. Delivering Results of Our Thoughts to the Readers We strive to provide the best both for readers and for our own as a writer. Of course, in the delivery of this report, we are not random. Our paper is already based on PSAK 12 as relevant resources that define about Joint Venture. Although we added some information based on our thoughts, we try to think logically, reasonable and based on the data. We did not invent the things that we discuss, and its existence is clear (simple example). In other words, we deliver what is in our report with full awareness and responsibility. 1.4. Systematics of Writing This paper consists of Chapter I, which contains background problems, formulation of the problem, the purpose of writing, and writing systematic. Chapter II describes the contents of the report. Chapter III contains a conclusion, bibliography, appendix.

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CHAPTER II EXPLANATION OF PSAK 12 PART OF PARTICIPATION ON JOINT VENTURE

2.1. Definition Here are the terms used in this statement: 2.1.1. Investors on Joint Venture Party to the joint venture and does not have joint control of the joint venture. 2.1.2. Proportionate Consolidation An accounting method which venturers part of any assets, liabilities, income and expenses of jointly controlled entities are combined one by one with a similar element in the financial statements of venturers or reported as a separate line item in the financial statements of venturers. 2.1.3. Separate Financial Statements The financial statements presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are recorded under section direct equity participation is not based on the results and net assets of the investee reported. 2.1.4. Equity Method A method of accounting whereby part of participation in jointly controlled entity is initially recorded at cost as adjusted for post-acquisition change in the venturer upper portion of the net assets of jointly controlled entities. Gains or losses venturer includes venture part of the profits or losses of jointly controlled entities. 2.1.5. Significant influence The power to participate in the financial and operating policy decisions of an economic activity, but not control or joint control over those policies. 2.1.6. Control The power to govern the financial and operating policies of an economic activity to benefit from such activities.
2.1.7. Joint control

A contractual agreement to share control over an economic activity, and there only when the strategic financial and operating decisions relating to the activity require the absolute consensus of the parties sharing control (venturers).

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2.1.8. Joint Venture A contractual arrangement whereby two or more parties run economic activity that is subject to joint control. 2.1.9. Venturer A party to the joint venture and has joint control over the joint venture. 2.2. General Characteristics of Whole Joint Venture It happened when : a. Two or more venturers are bound by a contractual agreement, and b. Contractual arrangement establishes joint control. 2.2.1. Joint Control Control with be hindered if the investee had: - Legal reorganization or bankruptcy, or - Operate in the long run tighter restrictions in its ability to transfer funds to the venturer. If joint control continues, the events are not enough to justify not applying the accounting for joint ventures. 2.2.2. Contractual Agreement The existence of a contractual agreement to distinguish between the participation involve joint control from investments in associates in which the investor has significant influence. Activities that have no contractual agreements to establish joint control are not joint ventures. Contractual arrangement may be evidenced in several ways, such as through a contract between the venturers or minutes of meetings between the venturers. In some cases, the agreement is included in the certificate or articles of association and by-laws of the joint venture. Whatever its form, the contractual arrangement is usually in writing and deals with such issues as: (a) The activity, duration and reporting obligations of the joint venture; (b) The determination of the board of directors or a similar organ of the joint venture and the voting rights venturer; (c) Capital contributions by the venturers, and (d) Distribution of the venturers on output, income, expenses or results of the joint venture.

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Contractual arrangement establishes joint control over the joint venture. These requirements ensure that no single venturer in a position to control the activity unilaterally. Contractual arrangement may mengidentifi kasi one venturer as the operator or manager of the joint venture. 2.3. Forms of Joint Venture

2.3.1. Jointly Control Operation (JCO) The operation of some joint ventures involves the use of assets and other resources of the venturers rather than the establishment of a limited liability company, partnership, or other entity, or a financial structure that is separate from the venturers. Each venturer uses fixed assets and inventory. Venturer bear the burden and obligation and obtain financing, representing obligations. Joint venture activities may be undertaken by venture employees in conjunction with similar ventures activities. Joint venture Agreements are usually set so that revenues from product sales and expenses incurred jointly shared between the venturers. The examples of joint control operation is when two or more venturers combine operations, resources and expertise to create a market and distribute certain products together, like an airplane. Different parts of the manufacturing process is done by each venturer. Each venturer bears its cost and earn revenue from the sale of aircraft parts, where the part is determined in accordance with the contractual arrangement.

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Example :
A and B form a half of each JCO. A lend Rp 400.000.000 and B lend Rp 300.000.000 to JCO. How do presentation? Total debt of JCO is Rp 700.000.000 Part A of Rp 350.000.000 (50% x Rp 700.000.000) in-offsetting the receivables to the PBO with Rp 400.000.000, so total accounts receivable to JCO is Rp 50.000.000 A onlu joint business with B and JCO is not a separate entity, so it is not presented Rp 200.000.000 receivable (50% x Rp 400.000.000) and debt of Rp 150.000.000 (50% x Rp 300.000.000)

2.3.2. Jointly Control Asset (JCA) Some joint ventures involve the joint control, and often the joint ownership, by the venturers of one or more assets contributed to or acquired for the purpose of the joint venture and the joint venture dedicated to the purpose. These assets are used to obtain benefits for the venturers. Each venturer may take a portion of the output from the assets and agreed to bear a portion of the expenses incurred. The joint venture does not involve the establishment A limited liability company, partnership, or other entity, or a financial structure that is separate from the venturers. Each venturer has control over its share of future economic benefits through its share of jointly controlled assets. An example of a jointly controlled asset is a lot of activity in the industrial extraction of oil, gas and mineral involve jointly controlled assets. For example, a company that produces oil jointly control and operate an oil pipeline. Each venturer uses the pipeline to transport its products and bears an agreed proportion of the burden of operating the pipeline. Another example of a jointly controlled asset is when two entities jointly control a property, where each party takes a portion of the rents received and bear a part of the burden.

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2.3.3. Jointly Control Entity (JCE) Jointly control entity is a joint venture that involves the establishment of a limited liability company, partnership or other entity in which each venturer has a section participation. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers create joint control over the economic activity of the entity. Jointly controlled entity controls the assets of joint venture, bear the liabilities and expenses and earn revenue. An entity may enter into contracts on behalf of itself and obtain financing for the purpose of joint venture activity. Each venturer has the right to a share of profits of jointly controlled entity, although some jointly controlled entities also include output distribution joint venture. Common examples of jointly controlled entities is when two entities combine their activities in a particular line of business by transferring the relevant assets and liabilities into a jointly controlled entity. Another example is when an entity starting a business abroad with the government or other institutions in the country, by establishing a separate entity jointly controlled by the entity and the government or agency. Venturer Financial Statements a. Proportionate consolidation Venturer section recognizes participation in jointly controlled entities using the equity method or, alternatively, the proportionate consolidation. When proportionate consolidation is used, then one of the two reporting formats used below. - Combining individual items of fixed assets - Splitting jointly controlled assets in a separate item Venturer stop using the proportionate consolidation from the date of loss of joint control over the venturer jointly controlled entities.

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b. Equity Method Venturer section recognized participation in jointly controlled entities using the equity method as the recommended option. The use of the equity method is supported by those who argue that it is not appropriate to combine the elements of self-controlled jointly controlled elements. Venturer stop using the equity method from the date venturers have joint control over the stop, or have significant influence in, jointly controlled entities. Venturer Separate Financial Statements Part of participation in jointly controlled entities are recorded in the separate financial statements in accordance with paragraphs 38-43 venturer SFAS 4. 2.4. Transactions are Made Between Venturer and Joint Venture If venturer contributes or sells assets to the joint venture, the recognition part of the gain or loss from the transaction reflects substance of the transaction. When the asset is maintained by the joint venture, and provided the venturer has divert significant benefits and risks of ownership of assets, the venturer recognizes only part of the profit or loss attributable to the other venturers participation. Venturers recognize the amount of the loss full when the contribution or sale provides evidence reduction in the net realizable value of current assets or impairment loss. When a venturer buy assets of a joint venture, the venturer not recognize its share of the joint venture profit from the transaction until venturer sells the assets to an independent party. Venturer recognizes its share any loss caused by transaction in the same way as profits except loss is recognized immediately when the

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loss is reflects a reduction in the realizable value of net of current assets or an impairment loss. To assess whether the transactions between venturers and a joint venture provides evidence of decline in assets, venturer determines the amount recoverable assets in accordance with FRS 48: Impairment of Assets. In determining the value of use, the venturer estimates future cash flows from assets on the basis of sustainable use of assets and release by the end of the joint venture. 2.5. Participations Report Section of Joint venture on Investors Financial Statement Investors in a joint venture that does not have control in accordance with record investment with SFAS No. 55, or if it has a significant influence in a joint venture, in accordance with SFAS 15. 2.6. Operators of Joint Venture Business or joint venture manager noted any remuneration in accordance with FRS 23: Revenue. One or more venturers may act as operator or manager of a joint venture. operators generally receive compensation for the task management. Rewards was recorded by the joint venture as an expense. 2.7. Disclosure Venturer disclose the aggregate amount of the following contingent liabilities (except probability loss is less likely) separately from the amount of other contingent liabilities: a) Any contingent liabilities incurred by venturer associated with the participation in joint ventures and its share of any contingent liabilities that have occurred with other venturers; b) section venturer contingent liabilities of joint venture itself where the joint venture is contingently payable, and c) contingent liabilities arising from the venturer is contingently payable to the obligations of the other venturers of a joint venture. Venturer disclose the aggregate amount of the following commitments associated with the participation in joint ventures separately from other commitments: a) any capital commitments venturers associated with the participation in joint ventures and its share in any capital commitments that have occurred with other venturers, and b) its share of the capital commitments of the joint venture itself.

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 Venturer section reveals a list and explanation of participation in significant joint ventures and the partisispasi ownership in jointly controlled entities. Venturers who admitted participation in part jointly controlled entities using the line-by-line reporting format for proportionate consolidation or the equity method, disclose the aggregate amount of all current assets, noncurrent assets, current liabilities, long-term liabilities, income and expenses associated with the participation in the joint venture. Venturer disclose the method used to recognize parts of his participation in jointly controlled entities. 2.8. Comparation 2.8.1. New PSAK 12 VS Old PSAK 12 PSAK 12 (revised) PSAK 12 (old) JCO, JCA, and JCE JCO and JCA Separate accounting records Separate financial are not required. statements must be prepared if the amount is material. Same Same Equity method and Not regulated Propotional consolidation.

Joint Venture JCO

JCA JCE

2.8.2. PSAK 12 and IAS 31 PSAK 12 JCE Accounting Equity method and Method proportionate consolidation Recommend the Equity method Separated Financial Venturer (parent) Statement Exceptions for Equity Assets held for sale Method and Proportionate Consolidation IAS 31 Equity method and proportionate consolidation Recommand the Proportionate consolidation Venturer parent) (parent and non-

Assets held for sale Terms of IAS 27 Certain conditions (not a public company or a process, all shareholders agree, and the ultimate / intermediary parent consolidated financial statements)

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CHAPTER III CONCLUSION

Joint Venture is a legal organization that takes the form of a short term partnership in which the persons jointly undertake a transaction for mutual profit. Generally each person contributes assets and share risks. Like a partnership, joint ventures can involve any type of business transaction and the "persons" involved can be individuals, groups of individuals, companies, or corporations. Joint ventures are also widely used by companies to gain entrance into foreign markets. Foreign companies form joint ventures with domestic companies already present in markets the foreign companies would like to enter. The foreign companies generally bring new technologies and business practices into the joint venture, while the domestic companies already have the relationships and requisite governmental documents within the country along with being entrenched in the domestic industry. General Characteristics of Whole Joint Venture Joint Control with be hindered if the investee had Legal reorganization or bankruptcy, orOperate in the long run tighter restrictions in its ability to transfer funds to the venturer. And If joint control continues, the events are not enough to justify not applying the accounting for joint ventures. Contractual Agreement isthe existences of a contractual agreement to distinguish between the participation involvejoint control from investments in associates in which the investor has significant influence. Activities that have no contractual agreements to establish joint control are not joint ventures. Contractual arrangement may be evidenced in several ways, such as through a contract between the venturers or minutes of meetings between the venturers. In some cases, the agreement is included in the certificate or articles of association and by-laws of the joint venture. There are three Forms of Joint Venture Jointly Control Operation (JCO) :The operation of some joint ventures involves the use of assets and other resources of the venturers rather than the establishment of a limited liability company, partnership, or other entity, or a financial structure that is separate from the venturers. Each venturer uses fixed assets and inventory. Ventures bear the burden and obligation and obtain financing, representing obligations. Jointly Control Asset (JCA) :Some joint ventures involve the joint control, and often the joint ownership, by the ventures of one or more assets contributed to or acquired for the purpose of the joint venture and the joint venture dedicated to the purpose. These assets are used to obtain benefits for the venturers. Each venturer may take a portion of the

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output from the assets and agreed to bear a portion of the expenses incurred. The joint venture does not involve the establishment Jointly Control Entity (JCE):Jointly control entity is a joint venture that involves the establishment of a limited liability company, partnership or other entity in which each venturer has a section participation. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers create joint control over the economic activity of the entity. Jointly controlled entity controls the assets of joint venture, bear the liabilities and expenses and earn revenue.

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BIBLIOGRAPHY
Dewan Standar Akuntansi Keuangan. (n.d.). Pernyataan Standar Akuntansi Keuangan No. 12 Revisi 2009.

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