two entities a and b each own half of a jointly controlled operation entity a has le 611788

Loans to jointly controlled operations

Two entities A and B each own half of a jointly controlled operation. Entity A has lent €400 to the jointly controlled operation, while entity B has lent €300. How should entity A account for its loan?

The jointly controlled operation has total borrowings of €400 + €300 = €700. A’s share in the borrowings of €350 =50% of €700) should be offset against its receivable of €400. Entity A should, therefore, account for a net receivable from its joint venture partner of €50 =€400 €350).

The jointly controlled operation is not a separate legal entity and under the joint venture agreement A has a business relationship only with B. Gross presentation of a receivable of €200 =€400 50% of €400) and a liability of €150 =50% of €300) would therefore not be appropriate.