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

Alpha Ltd and Beta Ltd jointly control Gamma Ventures, a separate entity set up as a joint venture. Alpha Ltd holds a 40% interest and prepares consolidated financial statements. Under AS 27, which method should Alpha Ltd use in its consolidated financial statements for this jointly controlled entity?

Alpha Ltd should use proportionate consolidation. AS 27 requires a venturer with consolidated financial statements to report its interest in a jointly controlled entity by combining its share of the entity's assets, liabilities, income and expenses line by line. The equity method applies to associates under AS 23.

  1. AEquity method
  2. BProportionate consolidationCorrect
  3. CCost method
  4. DFair value through profit or loss

Explanation

AS 27 requires a venturer to report its interest in a jointly controlled entity in consolidated financial statements using proportionate consolidation. The equity method is prescribed by AS 23 for associates, not for jointly controlled entities under AS 27.

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