Construction joint ventures

Large infrastructure projects are often too big or too specialised for one contractor, so firms form consortia and joint ventures. The same 60% share of the same project can produce very different accounts depending on the legal and contractual structure. This guide explains the IFRS 11 classification, works through both outcomes, and covers lead partners and joint and several liability.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. 3 minute read.

Short answer

Construction joint ventures are accounted for under IFRS 11 according to the partners' rights. In an unincorporated consortium, where each partner has rights to the assets and obligations for the liabilities, the arrangement is a joint operation and each partner recognises its share of revenue, costs, assets and liabilities. Where the project is run through a separate company and the partners only have rights to its net assets, it is a joint venture, accounted for using the equity method. In this guide's example, a 60% partner reports 30 million of revenue in one case and only a 2.4 million share of profit in the other.

At a glance

Standard
IFRS 11 Joint Arrangements
Joint control
Unanimous consent for key decisions
Joint operation
Share of revenue, costs, assets
Joint venture
Equity method
Separate company
Joint venture unless other facts
Common in
Unincorporated consortia
Construction joint venturesStandard: IFRS 11 Joint Arrangements; Joint control: Unanimous consent for key decisions; Joint operation: Share of revenue, costs, assets; Joint venture: Equity method; Separate company: Joint venture unless other facts; Common in: Unincorporated consortia.KEY FACTS AT A GLANCEConstruction joint venturesStandardIFRS 11 JointArrangementsJoint controlUnanimous consent for keydecisionsJoint operationShare of revenue, costs,assetsJoint ventureEquity methodSeparate companyJoint venture unlessother factsCommon inUnincorporated consortiaTax BakersConstruction joint venturesStandard: IFRS 11 Joint Arrangements; Joint control: Unanimous consent for key decisions; Joint operation: Share of revenue, costs, assets; Joint venture: Equity method; Separate company: Joint venture unless other facts; Common in: Unincorporated consortia.KEY FACTS AT A GLANCEConstruction joint venturesStandardIFRS 11 Joint ArrangementsJoint controlUnanimous consent for key decisionsJoint operationShare of revenue, costs, assetsJoint ventureEquity methodSeparate companyJoint venture unless other factsCommon inUnincorporated consortiaTax Bakers
Key facts at a glance, as set out in this guide.

Construction joint ventures: the same project, two structures

Two contractors win a CU 50 million rail project together, sharing 60% and 40%, with key decisions needing both to agree. The project makes a profit of 4 million in the year.

60% share of the same project60% share of the same projectTOPICJoint operationJoint ventureRevenue30NoneProfit2.42.4Balance sheetShare of each itemOne investmentStandardIFRS 11 joint operationIAS 28 equity method
Same profit, very different revenue and balance sheet.
60% partner's accountsUnincorporated consortium: joint operationProject company: joint venture
Revenue30None
Costs27.6None
Share of profit of joint ventureNone2.4
Balance sheetIts share of contract assets, liabilities and cashOne investment line

Profit is the same; revenue, margins, gearing and the balance sheet look very different. That matters for contractors whose revenue, margin and backlog figures are watched closely by lenders and investors.

Is there joint control?

Only if decisions about the relevant activities, such as approving the budget, key subcontracts and claims strategy, require the unanimous consent of the parties sharing control. If one partner can direct those activities alone, it controls the arrangement and consolidates it under IFRS 10. See control under IFRS 10.

Joint operation or joint venture?

An arrangement not structured through a separate vehicle is always a joint operation. One in a separate company is usually a joint venture, unless the company's legal form, the contractual terms or other facts give the partners rights to the assets and obligations for the liabilities. Other facts include partners being the only source of the company's cash flows and taking substantially all its output. Many construction project companies have no other source of finance than the partners and pass their work back to them, which can make them joint operations despite being incorporated.

What about joint and several liability?

Consortium partners are often jointly and severally liable to the client for the whole contract. Each partner recognises its share of the obligations, and discloses the contingent liability for its partners' shares, which becomes a provision only if a partner's default makes an outflow probable.

What about work a partner does for the joint arrangement?

Partners often supply plant, staff or subcontract work to the project. In a joint operation, a partner that sells to the arrangement recognises the gain only to the extent of the other partners' interests. In a joint venture, the partner eliminates its share of unrealised profit on work or assets it sells to the venture until the venture uses or sells them to a third party.

What if one partner leads and subcontracts to the other?

Sometimes one contractor signs the contract with the client and subcontracts part of the work to the other. That is not a joint arrangement: the lead contractor is the principal, recognising the full contract revenue, and the subcontract is a cost. The substance of the agreements, not their labels, decides which structure applies, so contractors read the consortium and subcontract agreements together.

How does the equity method work here?

The investor recognises its share of the joint venture's profit or loss, and the investment changes by that share less distributions. Losses beyond the investment are recognised only if the investor has obligations to fund them, which is common where partners guarantee project performance. See construction accounting, and for property and oil and gas partnerships, real estate joint ventures and joint operating agreements.

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Questions people ask

How are construction joint ventures accounted for under IFRS 11?

As joint operations, recognising a share of revenue, costs, assets and liabilities, or as joint ventures using the equity method, depending on the partners' rights.

Is an unincorporated construction consortium a joint operation?

Yes. An arrangement not structured through a separate vehicle is always a joint operation.

Can an incorporated project company be a joint operation?

Yes, if the partners have rights to its assets and obligations for its liabilities, for example because they take its output and are its only source of cash.

How is joint and several liability treated?

Each partner recognises its share of the obligations and discloses a contingent liability for the others' shares.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 11 Joint Arrangements

Rules and fees change. If you are reading this long after October 7, 2026, confirm the figures with the source before you rely on them.

IFRS 10Control: power, returns and the link between themConstructionConstruction accounting: the key IFRS issuesConstructionContract assets and liabilities in construction

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This guide is general information. It is not tax or legal advice for your situation.