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

On 1 April, Kaveri Ltd paid ₹50 crore for 30% of Godavari Ltd, an associate. The net fair value of Godavari's identifiable assets and liabilities was ₹180 crore. For the year, Godavari reported profit of ₹20 crore and declared a dividend of ₹10 crore, all received by the investors before year end. No other adjustments are required. At year end, what is the carrying amount of the investment in Kaveri's consolidated balance sheet under Ind AS 28?

The investment is initially carried at ₹54 crore, being 30% of ₹180 crore, with the ₹4 crore excess credited to capital reserve. Adding the 30% share of profit of ₹6 crore gives ₹60 crore, and deducting the dividend of ₹3 crore received reduces it to ₹57 crore.

  1. A₹57 croreCorrect
  2. B₹53 crore
  3. C₹60 crore
  4. D₹49 crore

Explanation

Share of net fair value is 30% × 180 = ₹54 crore, so the excess of ₹4 crore over the cost of ₹50 crore goes to capital reserve and the carrying amount starts at ₹54 crore. Add the share of profit of 30% × 20 = ₹6 crore to get ₹60 crore. Deduct the dividend received of 30% × 10 = ₹3 crore to get ₹57 crore. Option B ignores the excess, and option C ignores the dividend.

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