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CMA Final · Corporate Financial Reporting · Accounting and Reporting of Joint Operation

Narmada Ltd, a joint operator holding 25% in a joint operation, contributes equipment with a carrying amount of Rs 10,00,000 to it. The transaction is at an agreed value of Rs 7,00,000, and this value reflects an impairment of the equipment, since its recoverable amount has fallen below carrying amount. What loss should Narmada recognise on the contribution?

Narmada recognises the full loss of Rs 3,00,000. Under Ind AS 111, when a contribution to a joint operation evidences impairment or a reduction in net realisable value, the joint operator recognises the entire loss rather than only the other parties' share.

  1. ARs 3,00,000Correct
  2. BRs 2,25,000
  3. CRs 75,000
  4. DRs 7,50,000

Explanation

Where a sale or contribution provides evidence of impairment or a fall in net realisable value, the joint operator recognises those losses fully. The loss is 10,00,000 - 7,00,000 = Rs 3,00,000. Rs 2,25,000 wrongly limits the loss to the other parties' 75% interest, which applies to ordinary gains and losses and not to impairment evidence.

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