How do I account for jointly controlled assets such as shared pipelines?

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AcadiFi · Accepted Answer

Jointly controlled assets are a specific subset of joint operations under IFRS 11 where the shared asset itself is the focus. Each party recognizes: (a) its share of the jointly controlled asset, classified by the nature of the asset (property, plant, and equipment in this case); (b) any liabilities it has incurred on its own behalf; (c) its share of jointly incurred liabilities; (d) income from the sale or use of its share of the output; (e) its share of expenses incurred jointly. For Meridian and Atlas sharing the $840M pipeline 50/50, Meridian's balance sheet shows $420M of PP&E (its 50% share), not an investment line. If Meridian alone borrowed $300M to fund its contribution, that $300M sits entirely on Meridian's balance sheet as debt. If both firms jointly signed a $100M maintenance financing, each reports $50M. Throughput revenue: if the pipeline transports 200 bcf/year and Meridian sells its 100 bcf share for $240M, Meridian records $240M revenue — not 50% of total pipeline revenue. Depreciation: each party depreciates its 50% share over the pipeline's 40-year useful life, yielding $5.25M annual expense per party ($420M / 40 years is actually $10.5M, but this reflects Meridian's portion). The key ratio implication: this inflates asset base and depreciation versus an equity-method treatment, depressing apparent ROA even when the economics are identical.

How do I account for jointly controlled assets such as shared pipelines?

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