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

Arya Ltd holds 40% in a jointly controlled entity, Zenith JV Ltd, and prepares consolidated financial statements. Zenith JV Ltd's balance sheet shows: fixed assets Rs 50,00,000, current assets Rs 20,00,000, long-term borrowings Rs 30,00,000 and current liabilities Rs 10,00,000. Under proportionate consolidation, what will be added to Arya's consolidated total assets from Zenith JV Ltd, before eliminating any intragroup balances?

Rs 28,00,000 is added. Under AS 27 proportionate consolidation, the venturer includes its share of each asset line. Zenith's total assets are Rs 70,00,000 and Arya's 40% share is Rs 28,00,000. Taking the full amount or only the net assets share would be incorrect.

  1. ARs 28,00,000Correct
  2. BRs 70,00,000
  3. CRs 12,00,000
  4. DRs 40,00,000

Explanation

AS 27 requires proportionate consolidation, line by line, of the venturer's share. Total assets of Zenith = 50,00,000 + 20,00,000 = 70,00,000. Arya's 40% share = 28,00,000. Rs 70,00,000 is wrong as it takes 100%, and Rs 12,00,000 is 40% of net assets (30,00,000), which is the equity-method style figure.

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