What is the treatment of joint operations regarding assets and obligations?

In the context of joint operations, the correct treatment is that assets and liabilities related to the operation are recognized in the separate financial statements of the parties involved. This means that each party accounts for its share of the assets and liabilities arising from the joint operation directly in their financial statements.

This approach aligns with the fundamental accounting principle that assets and liabilities must be reported to give a fair view of an entity's financial position. Each party in a joint operation maintains its financial records showing its proportionate interest in the joint operation's assets and obligations. This recognition is crucial because it reflects the economic reality of the arrangement and ensures transparency in financial reporting.

The other treatments listed do not accurately represent how joint operations are treated under applicable accounting standards. For instance, the sharing of profits and losses equally or any specific method is not a defining characteristic of joint operations. Liabilities must not be ignored, as doing so would contravene the requirements for accurate financial reporting, and recognizing only revenue without costs fails to provide a complete picture of operational outcomes.