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

Ravi Ltd holds a 40% interest in Shanti Pvt Ltd, a jointly controlled entity, and prepares consolidated financial statements using proportionate consolidation. Shanti's year-end balance sheet shows fixed assets of ₹50,00,000 and current liabilities of ₹10,00,000. Ravi's own fixed assets are ₹1,20,00,000. What fixed assets figure will appear in the consolidated balance sheet of Ravi Ltd, ignoring other adjustments?

The consolidated fixed assets are ₹1,40,00,000. Under proportionate consolidation Ravi adds 40% of Shanti's fixed assets of ₹50,00,000, which is ₹20,00,000, to its own ₹1,20,00,000. Adding 100% of Shanti's assets would be wrong because Ravi only controls jointly.

  1. A₹1,40,00,000Correct
  2. B₹1,70,00,000
  3. C₹1,24,00,000
  4. D₹1,16,00,000

Explanation

Proportionate consolidation adds the venturer's share line by line: 40% of ₹50,00,000 = ₹20,00,000. Total = ₹1,20,00,000 + ₹20,00,000 = ₹1,40,00,000. The figure ₹1,70,00,000 wrongly adds 100% of Shanti's assets, which would be full line-by-line consolidation.

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