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Corporate Financial Reporting · Accounting and Reporting of Joint Operation

Joint Operator Transactions with a Joint Operation under Ind AS 111

Updated 11 October 2026 · Fact-checked

When a joint operator sells or contributes assets to its joint operation, it recognises gain or loss only to the extent of the other parties' interests (B34). When it buys assets, it recognises no share of profit until resale to a third party (B36). Losses showing impairment or lower net realisable value are recognised as paragraphs B35 and B37 say.

Understand Transactions between a Joint Operator and Joint Operation

A joint operator has rights to the assets and obligations for the liabilities of the joint operation. Under paragraph 20, it books its own assets, liabilities, revenue and expenses relating to the arrangement. So when it deals with the joint operation, part of the deal is with itself.

That is the key idea. The joint operator owns a share of the joint operation. If it sells an asset to the joint operation at a profit, its own share of that profit is only a transfer from one pocket to another. The part that belongs to the other parties is a real transaction with outsiders.

So for a sale or contribution of assets, you recognise gain or loss only to the extent of the other parties' interests (B34). The share that relates to your own interest stays unrecognised. This is the unrealised profit.

For a purchase of assets from the joint operation, you do not recognise your share of the gain or loss until you resell the assets to a third party (B36). Your share of the profit sits inside the asset you hold.

Losses are treated differently. If the transaction shows the asset's net realisable value has fallen, or the asset is impaired, the loss is real and is not deferred. On a sale or contribution, the joint operator recognises the loss fully (B35). On a purchase, it recognises its share of the loss (B37). Paragraph 22 sends you to B34 to B37 for all of this.

Key rules to remember

Gain recognised on sale or contribution of assets (B34)
Gain recognised = Total gain × Share of other parties in the joint operation
Equals total gain less operator's own share. The operator's own share is unrealised and eliminated.
Loss on sale or contribution due to NRV fall or impairment (B35)
Loss recognised = 100% of the loss
Applies when the transaction is evidence of reduced net realisable value or impairment. No proportionate elimination.
Purchase of assets from joint operation (B36)
Operator's share of gain or loss recognised on purchase = Nil until resale to a third party
On resale outside, the deferred share is recognised.
Loss on purchase due to NRV fall or impairment (B37)
Loss recognised = Operator's share of the loss
Recognised immediately, not deferred.

How to solve Transactions between a Joint Operator and Joint Operation questions

Use this order for any question where a joint operator deals with its joint operation.

  1. 1Confirm the arrangement is a joint operation and that the entity is a joint operator with joint control.
  2. 2Identify the direction: sale or contribution to the joint operation, or purchase from it.
  3. 3Compute the total gain or loss: selling price less carrying amount (or the joint operation's profit on the goods bought).
  4. 4Check whether the loss is due to an NRV fall or impairment. If yes, apply B35 (full loss on sale) or B37 (share of loss on purchase).
  5. 5For a sale or contribution with a gain, recognise gain × other parties' share. Defer the operator's own share.
  6. 6For a purchase, recognise nothing of the operator's share of profit while the goods are held. Remove it from inventory or the asset carrying amount.
  7. 7If the asset is resold to a third party, or partly resold, release the deferred profit in proportion.
  8. 8Pass the journal entries and state the closing carrying amount of the asset in the operator's books.

Quickest way: Other-parties share shortcut

When to use it: Use it for numerical MCQs and short problems on gain on sale or contribution of assets.

  1. Write the operator's share, for example 40%. The other parties hold 60%.
  2. Gain recognised = total gain × 60%.
  3. Unrealised gain = total gain × 40%. It reduces the profit or the asset's carrying amount.
  4. If the question says NRV fell or the asset is impaired, recognise the whole loss and skip the proportion.
  5. For purchases, recognise zero of your share of profit until resale.

Common mistakes in Transactions between a Joint Operator and Joint Operation

  • Recognising the full gain on sale of an asset to the joint operation.

    Students treat the joint operation like an outside buyer.

    Fix: Remember the operator owns part of the buyer. Recognise gain only for the other parties' share (B34).

  • Recognising only a proportionate part of a loss caused by impairment.

    Students apply the same share rule to gains and losses.

    Fix: Where the loss shows lower net realisable value or impairment, recognise it fully on a sale or contribution (B35).

  • Recognising profit on purchase from the joint operation immediately.

    Students think a purchase is like any other purchase from a supplier.

    Fix: Do not recognise your share of the gain or loss until you resell to a third party (B36).

  • Using the operator's share instead of the other parties' share in the gain formula.

    Mixing up which side is recognised and which is eliminated.

    Fix: Recognised = other parties' share. Eliminated = your own share. Write both percentages first.

  • Applying these rules when the arrangement is a joint venture.

    Students overlook the classification step.

    Fix: These paragraphs apply to a joint operator in a joint operation. A joint venture follows the equity method, which is a different topic.

Worked examples

Example 1

Meera Industries Ltd is a joint operator with a 40% interest in a joint operation with two other parties holding 60% in total. It sells machinery with a carrying amount of ₹8,00,000 to the joint operation for ₹10,00,000. There is no sign of impairment. Compute the gain to be recognised and the unrealised gain.

Show the solution
  1. Total gain = ₹10,00,000 − ₹8,00,000 = ₹2,00,000.
  2. Under B34, gain is recognised only to the extent of the other parties' interests, which is 60%.
  3. Gain recognised = ₹2,00,000 × 60% = ₹1,20,000.
  4. Unrealised gain, the operator's own 40% share = ₹2,00,000 × 40% = ₹80,000.
  5. The ₹80,000 is not recognised. It is eliminated against the operator's share of the machinery in its books.

Answer: Gain recognised ₹1,20,000; unrealised gain eliminated ₹80,000.

Example 2

Kaveri Ltd has a 25% interest in a joint operation. It buys goods from the joint operation for ₹6,00,000, which the joint operation had produced at a cost of ₹4,00,000. At year end, Kaveri has sold half of these goods to outside customers and holds the other half. Find the unrealised profit that Kaveri must not recognise at year end. Also state the effect if the goods were instead found to be impaired.

Show the solution
  1. Total profit of the joint operation on the sale = ₹6,00,000 − ₹4,00,000 = ₹2,00,000.
  2. Kaveri's share of that profit = ₹2,00,000 × 25% = ₹50,000.
  3. Under B36, Kaveri recognises its share of the profit only when goods are resold to a third party.
  4. Half of the goods are resold, so ₹50,000 × 50% = ₹25,000 is realised.
  5. Half remain in stock, so ₹50,000 × 50% = ₹25,000 is unrealised and is not recognised.
  6. If the goods were impaired or their NRV had fallen, B37 requires Kaveri to recognise its share of that loss immediately.

Answer: Unrealised profit not recognised at year end is ₹25,000. Any impairment or NRV loss is recognised at Kaveri's share under B37.

Exam tips

  • Write the operator's and the other parties' percentages at the start. Most mark loss comes from using the wrong one.
  • In a case scenario, check whether the loss is due to impairment or NRV fall. It changes the answer from a share to the whole loss on a sale.
  • Cite the paragraph numbers B34 to B37 and paragraph 22 in written answers. It shows you know the standard.
  • Separate sale from purchase. The sale rule recognises the other parties' share. The purchase rule defers until resale.
  • Show the elimination journal or the reduced carrying amount of the asset, not only the figure.

Practice questions from Accounting and Reporting of Joint Operation

Transactions between a Joint Operator and Joint Operation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Transactions between a Joint Operator and Joint Operation: frequently asked questions

Why is only the other parties' share of the gain recognised?

Because the joint operator is effectively dealing with the other parties to the joint operation. Its own share would be a sale to itself, so it is not a realised gain (B34).

What is the rule when a joint operator buys assets from the joint operation?

It does not recognise its share of the gain or loss until it resells the assets to a third party (B36). If the purchase shows an NRV fall or impairment, it recognises its share of that loss (B37).

Are losses on sale to the joint operation shared in the same way as gains?

No. If the transaction shows a reduction in net realisable value or an impairment loss, the joint operator recognises the loss fully (B35). Losses of this kind are not deferred.

Where does Ind AS 111 deal with these transactions?

Paragraph 22 says such transactions are accounted for under paragraphs B34 to B37 of Appendix B.