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

Meera Ltd, a venturer with a 50% share in a jointly controlled entity Tara Ltd, sold goods costing ₹6,00,000 to Tara Ltd for ₹8,00,000. Tara Ltd still holds all these goods as inventory at year end. In Meera Ltd's consolidated financial statements, the unrealised profit to be eliminated is:

The unrealised profit eliminated is ₹1,00,000. The total profit on the sale is ₹2,00,000, and in proportionate consolidation Meera Ltd eliminates only its 50% share of the unrealised profit while the goods remain with Tara Ltd.

  1. A₹2,00,000
  2. B₹1,00,000Correct
  3. C₹4,00,000
  4. DNil, as the goods are unsold

Explanation

Total profit = 8,00,000 − 6,00,000 = 2,00,000. Under AS 27, the venturer eliminates only the portion attributable to the other venturers' interests when the goods are still held by the JCE, as the venturer's own share is retained in proportionate consolidation. Eliminating the full 2,00,000 would ignore this share, whereas the correct amount is 50% × 2,00,000 = 1,00,000.

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