Skip to content

CMA Final · Corporate Financial Reporting · Accounting and Reporting of Joint Operation

Delta Ltd is a joint operator with a 20% share. It buys from the joint operation a machine for ₹7,00,000 whose carrying amount in the joint operation was ₹10,00,000. The transaction provides evidence of an impairment loss on the machine, as its net realisable value is ₹7,00,000. What does Delta Ltd recognise?

Delta Ltd recognises ₹60,000, its 20% share of the ₹3,00,000 loss. For purchases from a joint operation that show impairment or reduced net realisable value, the joint operator recognises its share of the loss immediately instead of deferring it.

  1. AIts 20% share of the loss, ₹60,000Correct
  2. BThe full loss of ₹3,00,000
  3. CNo loss until the machine is resold
  4. DIts 80% share of the loss, ₹2,40,000

Explanation

Under para B37, when a purchase from a joint operation provides evidence of reduced net realisable value or impairment, the joint operator recognises its share of the losses. Loss = 10,00,000 - 7,00,000 = ₹3,00,000; Delta's 20% share is ₹60,000. Full recognition applies to sales (B35), not purchases, and deferral applies only to ordinary gains and losses.

Did you get it right without looking?

One question tells you little. A timed set on Accounting and Reporting of Joint Operation shows your real accuracy, how long you take and where you lose marks.

Practise Accounting and Reporting of Joint OperationFree diagnostic mock

More Accounting and Reporting of Joint Operation questions