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

Meera Ltd and Nanda Ltd enter into a contractual arrangement to run a textile processing unit. The unit is carried on through a separate entity, Meera-Nanda Processing LLP, in which each venturer has 50% and joint control under the agreement. Under AS 27, this joint venture is classified as:

The arrangement is a jointly controlled entity under AS 27, because the venturers set up a separate LLP in which each holds an interest and shares joint control by contract. Jointly controlled operations and assets do not involve a separate entity, and an associate involves only significant influence.

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

Explanation

AS 27 recognises three forms of joint venture: jointly controlled operations, jointly controlled assets and jointly controlled entities. When the venture involves establishing a separate corporate, partnership or other entity in which each venturer has an interest and joint control exists, it is a jointly controlled entity. An associate involves significant influence, not joint control.

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