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

Kaveri Ltd is a joint operator with a 30% share in a joint operation. It buys goods from the joint operation for Rs 5,00,000; the goods cost the joint operation Rs 4,00,000. At year end Kaveri has resold 60% of these goods (by cost) to third parties and still holds the remaining 40%. What is Kaveri's share of the joint operation's profit on this transaction that it can recognise in the year, under Ind AS 111?

Kaveri can recognise Rs 18,000. Its 30% share of the Rs 1,00,000 profit is Rs 30,000, and under Ind AS 111 that share is recognised only when assets are resold to third parties, which has happened for 60% of the goods.

  1. ARs 30,000
  2. BRs 18,000Correct
  3. CRs 12,000
  4. DRs 18,000 recognised only after all goods are resold

Explanation

Under Ind AS 111 a joint operator does not recognise its share of gains on purchases from the joint operation until it resells the assets to a third party. Total profit is Rs 1,00,000. Its 30% share is Rs 30,000. Only the 60% resold portion is realised, so 60% x 30,000 = Rs 18,000. Rs 12,000 is the unrealised portion that is still deferred.

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