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CA Final · Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures

Alpha Ltd acquires 30% of Beta Ltd and obtains significant influence. The investor's share of the net fair value of Beta's identifiable assets and liabilities exceeds the cost of the investment. Under Ind AS 28 (paragraph 32(b)), how is this excess treated?

Under Ind AS 28, when the investor's share of the net fair value of the associate's identifiable assets and liabilities exceeds the cost of investment, the excess is transferred to capital reserve. This follows Ind AS 103. It is not recognised in profit or loss, unlike IAS 28.

  1. AIt is recognised as income in the statement of profit and loss of the acquisition period
  2. BIt is transferred to capital reserveCorrect
  3. CIt is deducted from the carrying amount of other investments of the investor
  4. DIt is ignored, as the investment stays at cost

Explanation

Paragraph 32(b) of Ind AS 28 was modified on the lines of Ind AS 103. The excess of the investor's share of the net fair value of identifiable assets and liabilities over cost is transferred to capital reserve. IAS 28 takes it to profit or loss, which is why the first option is wrong for Ind AS.

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