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CA Intermediate · Advanced Accounting · AS 27 Financial Reporting of Interests in Joint Ventures

Kiran Ltd and Lalit Ltd jointly own a pipeline (jointly controlled asset) in the ratio 60:40. The pipeline cost Rs 50,00,000 and annual running expenses were Rs 10,00,000, of which Kiran Ltd paid its share. Under AS 27, what does Kiran Ltd show in its own financial statements regarding the pipeline asset and its share of expenses?

Kiran Ltd shows the pipeline at Rs 30,00,000 and expenses of Rs 6,00,000. For a jointly controlled asset, AS 27 requires each venturer to recognise its own share of the asset and of the expenses incurred, here 60% of the totals.

  1. AAsset Rs 30,00,000 and expenses Rs 6,00,000Correct
  2. BAsset Rs 50,00,000 and expenses Rs 10,00,000
  3. CAsset Rs 20,00,000 and expenses Rs 4,00,000
  4. DOnly an investment in the pipeline at cost

Explanation

For jointly controlled assets, a venturer recognises its share of the jointly controlled assets, classified by nature, and its share of expenses incurred. Kiran's share: 60% x 50,00,000 = 30,00,000 and 60% x 10,00,000 = 6,00,000. Rs 20,00,000 and Rs 4,00,000 reflect Lalit's 40% share.

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