Skip to content

CA Intermediate · Advanced Accounting · AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Himalaya Ltd acquired 30% of Yamuna Ltd on 1 April 2024 and has used the equity method since. At 31 March 2026 the carrying amount of the investment, including its share of profits, is Rs 24,00,000. Yamuna has accumulated losses and in 2025-26 reported a loss of Rs 90,00,000. Himalaya's share of the current year loss is therefore Rs 27,00,000, and the carrying amount before this loss was Rs 24,00,000. Himalaya has no obligation to fund Yamuna and has given no guarantees. In the same year Yamuna's loss recognised earlier was nil. What amount of loss does Himalaya recognise in the consolidated statement of profit and loss for 2025-26, and what is the closing carrying amount?

Himalaya recognises a loss of Rs 24,00,000 and the investment is carried at nil. AS 23 limits recognition of an associate's losses to the carrying amount of the investment when the investor has no obligation or guarantee, so the excess Rs 3,00,000 is not booked as a liability.

  1. ARs 27,00,000 loss; carrying amount negative Rs 3,00,000
  2. BRs 24,00,000 loss; carrying amount nilCorrect
  3. CRs 27,00,000 loss; carrying amount nil
  4. DRs 3,00,000 loss; carrying amount Rs 21,00,000

Explanation

Under AS 23, losses are recognised only until the carrying amount of the investment is reduced to zero, unless the investor has obligations or guarantees. The share of loss is Rs 27,00,000 but the investment is Rs 24,00,000, so only Rs 24,00,000 is recognised and the carrying amount is nil. The excess Rs 3,00,000 is not recorded, and is considered against future profits.

Did you get it right without looking?

One question tells you little. A timed set on AS 23 Accounting for Investments in Associates in Consolidated Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise AS 23 Accounting for Investments in Associates in Consolidated Financial StatementsFree diagnostic mock

More AS 23 Accounting for Investments in Associates in Consolidated Financial Statements questions