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

Kaveri Ltd is a 25% joint operator in JO-3. It contributes machinery with a carrying amount of Rs 20,00,000 to JO-3 in a sale for Rs 14,00,000. The sale price shows that the machinery is impaired, as its net realisable value is Rs 14,00,000. What loss does Kaveri Ltd recognise?

Kaveri Ltd recognises the full loss of Rs 6,00,000. When a sale to a joint operation provides evidence of impairment or reduced net realisable value, the joint operator must recognise the loss fully rather than only to the extent of other parties' interests.

  1. ARs 6,00,000Correct
  2. BRs 4,50,000
  3. CRs 1,50,000
  4. DRs 0

Explanation

Under Ind AS 111 (B35), where a sale or contribution evidences a reduction in net realisable value or an impairment loss, the joint operator recognises the loss fully. Loss = 20,00,000 - 14,00,000 = Rs 6,00,000. Recognising only 75% (Rs 4,50,000) wrongly applies the partial rule meant for gains.

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