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

Ishwar Ltd acquired 30% of Jyoti Ltd on 1 April 2024 for ₹ 9,00,000 when its share in Jyoti's net assets was ₹ 8,00,000. Jyoti's profit for 2024-25 was ₹ 4,00,000 and for 2025-26 was a loss of ₹ 20,00,000, with no dividends. Ishwar has no obligation to fund Jyoti's losses. What carrying amount of the investment appears at 31 March 2026 in Ishwar's consolidated balance sheet, and what happens to the unrecognised losses?

None of the stated options is correct as written.

  1. ANil; excess loss of ₹ 4,20,000 is not recognised but disclosed/tracked for later profitsCorrect
  2. B₹ 3,00,000; loss is shown net as a liability
  3. CNil; excess loss of ₹ 4,20,000 is recognised as a liability
  4. D₹ 9,00,000; no loss is recognised as it exceeds net assets

Explanation

After 2024-25: 9,00,000 + 30% x 4,00,000 = 10,20,000. Share of 2025-26 loss = 30% x 20,00,000 = 6,00,000. Carrying amount would be 4,20,000, not nil. Recomputing: loss 6,00,000 reduces 10,20,000 to 4,20,000, so no loss exceeds the investment.

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