An accounting jargon technique using joint

As a jargon technique, the International Financial Reporting Standards often choose a word and stick it onto others to invent accounting terms. The writers of IFRS 11 chose ‘joint’ from the well known accounting term ‘joint venture’ and invented five new accounting terms.

“A joint arrangement is either a joint operation or a joint venture.” [1]

Then to define joint arrangement, they came up with the term joint control:

“Joint control is the contractually agreed sharing of control of an arrangement…” i.e. a joint arrangement.

With these three, they added a joint operator and joint venturer to make up the total of five.

I am surprised that they did not invent the joint controller: a person who prepares the contacts for joint control or joint arranger whose definition would be simple: “A joint arranger is either a joint operator or a joint venturer.” Instead they fall back on the mundane ‘‘party to a joint arrangement’. Perhaps they thought that six new accounting terms would be too excessive.

Even with these five, the writers of the standard sometimes get confused, and sentences become difficult to understand. Here is an example:

“A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3.” [2]

Two joint controls and three joint operations in 38 words, nearly 30% of the words in the sentence.

They first tried out this jargon technique in IAS 21 by repeating three terms: foreign currency, functional currency and presentation currency. They then developed the technique in IFRS 7 with the word ‘risk’, building on the well known credit risk, but only daring to add four more accounting terms: currency risk, liquidity risk, interest rate risk and market risk.

With three and four repetitive accounting terms, the writers manage to avoid getting tied up in knots, it is only when they come up with five terms in IFRS 11 that they get tied up in joints.

[1] Paragraph 6 of International Financial Reporting Standard 11 Joint Arrangements, IFRS 11

[2] Paragraph B33CA of International Financial Reporting Standard 11 Joint Arrangements, IFRS 11

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