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CA Final · Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures

Mehta Industries Ltd acquires a stake in an associate. On acquisition, its share of the net fair value of the associate's identifiable assets and liabilities exceeds the cost of the investment. How does Ind AS 28 (paragraph 32(b)) deal with the excess, and how does this differ from IAS 28?

Under Ind AS 28, the excess of the investor's share of the net fair value of the investee's identifiable assets and liabilities over the cost of investment is transferred to capital reserve, in line with Ind AS 103. IAS 28 instead recognises that excess in profit or loss.

  1. AInd AS 28 transfers the excess to capital reserve, whereas IAS 28 recognises it in profit or lossCorrect
  2. BInd AS 28 recognises the excess in profit or loss, whereas IAS 28 transfers it to capital reserve
  3. CBoth Ind AS 28 and IAS 28 transfer the excess to capital reserve
  4. DBoth Ind AS 28 and IAS 28 recognise the excess as negative goodwill shown as a liability

Explanation

Paragraph 32(b) of Ind AS 28 has been modified in line with Ind AS 103. The excess of the investor's share of the net fair value over cost goes to capital reserve. IAS 28 recognises the same excess in profit or loss. The second option reverses the two treatments.

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