Tiger Gems Ltd. and Mammoth Minerals Ltd. are engaged in extraction of coal and minerals from coal-fields, which they own and operate independently…

(a) (i) Determination of Joint Arrangement As per Ind AS 111 'Joint Arrangements', a joint arrangement is an arrangement of which two or more parties have joint control. 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. The structure and form of the arrangement determines the nature of the relationship. Joint Operation: A joint arrangement which is NOT structured through a separate vehicle is a joint operation. In such a case, the contractual arrangement establishes the parties' rights and obligations. Joint Venture: A Joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation in accordance with the relevant Ind AS. The arrangement between Tiger Gems Ltd. and Mammoth Minerals Ltd. is a joint operation as no separate vehicle is formed and the companies have agreed to share services and costs with decisions regarding the underground 'Luminous' coal mine requiring unanimous agreement of both the parties. Both the companies should recognize their share of the asset as Property, Plant and Equipment. (ii) Accounting for the unextracted coal and mineral As per para 16 of Ind AS 16 'Property, Plant and Equipment', the cost of an item of property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Further, para 45 of Ind AS 37 ‘Provisions, Contingent Liabilities and Contingent Assets', provides that where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to be required to settle the obligation. Thus, costs incurred by an entity in respect of obligations for dismantling, removing and restoring the site on which an item of property, plant and equipment is situated are recognized and measured in accordance with Ind AS 16 and Ind AS 37. Each of the entities in the joint arrangement should recognize their respective share of the cost of decommissioning of the underground storage facility. However, as per para 29 of Ind AS 37 where an entity is jointly and severally liable for an obligation, the part of the obligation that is expected to be met by other parties is treated as a contingent liability. Accordingly, each of the entities in the joint arrangement should also disclose the share of the cost of decommissioning of the underground facility, to be borne by another joint arrangement entity, as a contingent liability. As per Ind AS 16, Property, Plant and Equipment are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than one period. Thus, both the entities should classify and account for their share of irrecoverable coal and minerals as property, plant and equipment, as the irrecoverable coal and minerals is necessary for the storage facility to perform its function. Therefore, the irrecoverable coal and minerals, being a part of the storage facility, should be capitalized as a component of the storage facility asset, and should be depreciated to its residual value over the life of the storage facility.