4. SIGNIFICANT ACCOUNTING POLICIES (continued) 4.7 Investments (continued) (c) Joint arrangements A joint arrangement is an arrangement in which two or more parties have joint control. The parties are bound by a contractual arrangement which gives two or more parties joint control of the arrangement. Joint control is 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. A joint arrangement is either a joint operation or a joint venture. The Group determines the type of joint arrangement in which it is involved, based on the rights and obligations of the parties to the arrangement. In assessing the classification of interests in joint arrangements, the Group considers: (i) the structure of the joint arrangement; (ii) the legal form of joint arrangements structured through a separate vehicle; (iii) the contractual terms of the joint arrangement agreement; and (iv) any other facts and circumstances. When there are changes in the facts and circumstances, the Group reassesses whether the type of joint arrangement in which it is involved has changed. Joint venture A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. These parties are known as joint venturers. In the separate financial statements of the Company, an investment in a joint venture is stated at cost. Any premium paid for an investment in a joint venture above the fair value of the share of the identifiable assets, liabilities and contingent liabilities acquired of the Group is capitalised and included in the carrying amount of the investment in joint venture. Where there is an objective evidence that the investment in a joint venture has been impaired, the carrying amount of the investment is tested for impairment in accordance with MFRS 136 Impairment of Assets as a single asset, by comparing its recoverable amount with its carrying amount. The Group recognises its interest in a joint venture as an investment and accounts for that investment using the equity method in accordance with MFRS 128 Investments in Associates and Joint Ventures. Under the equity method, the investment in joint venture is initially recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s share of profit or loss and other comprehensive income of the joint venture after the date of acquisition. When the Group’s share of losses in a joint venture equal or exceeds its interest in a joint venture, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint venture. NOTES TO THE FINANCIAL STATEMENTS P R G H O L D I N G S B E R H A D A N N U A L R E P O R T 2 0 2 1 96 31 December 2021 (cont’d)
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