CA Intermediate · Advanced Accounting · AS 27 Financial Reporting of Interests in Joint Ventures
Meera Ltd owns 50% of Jal Ltd, a jointly controlled entity. During the year Meera Ltd sold goods costing Rs 6,00,000 to Jal Ltd for Rs 8,00,000. Jal Ltd sold none of them by the year-end and they remain in its closing stock. In Meera Ltd's consolidated statements, what unrealised profit is eliminated?
The unrealised profit eliminated is Rs 1,00,000. The profit on the transaction is Rs 2,00,000, and in consolidation the venturer eliminates only its own 50% share of the unrealised profit on goods still held by the jointly controlled entity.
- ARs 2,00,000
- BRs 1,00,000Correct
- CRs 4,00,000
- DNil, as the sale is to a joint venture
Explanation
Total profit on the sale = 8,00,000 - 6,00,000 = 2,00,000, all unsold. AS 27 requires the venturer to recognise only the portion attributable to the other venturers when selling to a jointly controlled entity, so the portion corresponding to its own share is eliminated: 50% of 2,00,000 = 1,00,000. Eliminating the full 2,00,000 ignores that the other venturers' share is realised.
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