Skip to content

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

Bharat Ltd is a venturer holding 50% in a jointly controlled entity, Kiran JV Ltd. During the year Bharat sold goods costing Rs 8,00,000 to Kiran JV for Rs 10,00,000. At the year end, Kiran JV had sold none of these goods. In Bharat's consolidated financial statements, what amount of unrealised profit is eliminated under AS 27?

Rs 1,00,000 is eliminated. The profit on the sale is Rs 2,00,000, and as the goods remain unsold by the jointly controlled entity, the venturer's 50% share of that profit is unrealised in consolidation. Only the portion attributable to the other venturer is recognised.

  1. ARs 2,00,000
  2. BRs 1,00,000Correct
  3. CRs 10,00,000
  4. DRs 5,00,000

Explanation

On sale by a venturer to the jointly controlled entity, the venturer recognises only that portion of profit attributable to the other venturers. Total profit = 10,00,000 - 8,00,000 = 2,00,000. Bharat's 50% share is 1,00,000, which is eliminated in proportionate consolidation, while the portion attributable to the other venturer is realised. Eliminating the whole Rs 2,00,000 ignores the share rule.

Did you get it right without looking?

One question tells you little. A timed set on AS 27 Financial Reporting of Interests in Joint Ventures shows your real accuracy, how long you take and where you lose marks.

Practise AS 27 Financial Reporting of Interests in Joint VenturesFree diagnostic mock

More AS 27 Financial Reporting of Interests in Joint Ventures questions