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

Kaveri Ltd holds 40% of Lotus Ltd, an associate acquired several years ago. At 31 March 2025 the carrying amount of the investment in Kaveri Ltd's consolidated balance sheet was ₹60 lakh. During 2025-26 Lotus Ltd incurred a loss of ₹200 lakh and paid no dividend. What amount will Kaveri Ltd show as its share of the associate's loss in the consolidated statement of profit and loss for 2025-26, and the carrying amount at 31 March 2026?

Kaveri Ltd recognises a loss of ₹60 lakh and the investment is reduced to nil. Its share of the associate's loss is ₹80 lakh, but AS 23 requires the investor to stop recognising further losses once the investment is reduced to zero, so the excess ₹20 lakh is not booked.

  1. ALoss ₹60 lakh; carrying amount nilCorrect
  2. BLoss ₹80 lakh; carrying amount negative ₹20 lakh
  3. CLoss ₹80 lakh; carrying amount nil
  4. DLoss ₹60 lakh; carrying amount ₹20 lakh

Explanation

Share of loss = 40% x 200 = ₹80 lakh. Under AS 23, the investor discontinues recognising its share of losses once the carrying amount is reduced to nil, so only ₹60 lakh is recognised. The excess ₹20 lakh is not recorded (absent obligations), leaving carrying amount nil.

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