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

Meera Ltd and Nakul Ltd contractually agree to share control of a venture, Vistar Infra, which is run as a separate entity with its own assets and liabilities. Each venturer holds 50% of the equity. Under AS 27, how is this joint venture classified?

The arrangement is a jointly controlled entity. AS 27 treats a venture that is carried on through a separate entity, in which each venturer has an interest and which is subject to contractual joint control, as a jointly controlled entity. Associates involve only significant influence, not shared control.

  1. AJointly controlled operations
  2. BJointly controlled assets
  3. CJointly controlled entityCorrect
  4. DAssociate under AS 23

Explanation

AS 27 recognises three forms of joint venture: jointly controlled operations, jointly controlled assets and jointly controlled entities. A joint venture that involves establishing a separate corporate, partnership or other entity in which each venturer has an interest, under a contractual arrangement for joint control, is a jointly controlled entity. An associate involves significant influence, not joint control, so it is wrong.

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