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

Meera Ltd and Kaveri Ltd set up a separate legal entity, Sagar Infra Pvt Ltd, in which each holds 50% and they share control by contractual agreement. Under AS 27, this joint venture is classified as which form?

It is a jointly controlled entity. AS 27 uses this term when a corporate body or other entity is established in which each venturer has an interest and the venturers jointly control its economic activity under a contractual arrangement. Joint control, not mere significant influence, distinguishes it from an associate.

  1. AJointly controlled operations
  2. BJointly controlled assets
  3. CJointly controlled entityCorrect
  4. DInvestment in an associate

Explanation

AS 27 identifies three forms of joint venture: jointly controlled operations, jointly controlled assets and jointly controlled entities. Where a separate corporate entity is established and the venturers share control by contract, it is a jointly controlled entity. An associate involves significant influence, not joint control.

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