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CA Intermediate · Advanced Accounting · AS 27 Financial Reporting of Interests in Joint Ventures

Alpha Ltd and Beta Ltd jointly control an operation under a contractual arrangement. Each venturer uses its own plant and employees, keeps its own inventory and raises its own liabilities, with no separate entity formed. Under AS 27, this arrangement is best classified as:

The arrangement is jointly controlled operations, because each venturer uses its own assets and employees, carries its own inventory and liabilities, and no separate entity exists. AS 27 requires each venturer to account for its own assets, expenses and share of revenue from the venture.

  1. AJointly controlled entity
  2. BJointly controlled operationsCorrect
  3. CJointly controlled assets
  4. DInvestment in an associate

Explanation

In jointly controlled operations, each venturer uses its own assets and resources for the venture and no separate entity is set up. Each venturer recognises its own assets, liabilities, expenses and its share of revenue. A jointly controlled entity requires a separate corporate, partnership or other entity, which is absent here.

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