CA Intermediate · Advanced Accounting · AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Rohan Ltd holds 25% of Sunrise Ltd, an associate acquired on 1 April 2025 at a cost of Rs 12,00,000. On that date Sunrise's equity share capital was Rs 20,00,000 and reserves Rs 24,00,000. For 2025-26 Sunrise earned a profit after tax of Rs 8,00,000 and declared no dividend. During the year Rohan sold goods to Sunrise at a profit of Rs 2,00,000, of which goods with a profit element of Rs 80,000 remain in Sunrise's closing inventory. Under AS 23 the unrealised profit is eliminated to the extent of Rohan's interest in the associate. What are the goodwill included in the carrying amount and the closing carrying amount of the investment at 31 March 2026?

Goodwill is Rs 1,00,000 and the carrying amount is Rs 13,80,000. Goodwill is cost Rs 12,00,000 less 25% of net worth Rs 44,00,000, i.e. Rs 11,00,000. Carrying amount is cost plus share of profit Rs 2,00,000, less 25% of unrealised profit Rs 80,000, i.e. Rs 20,000.

1. AGoodwill Rs 1,00,000; carrying amount Rs 13,80,000Correct
2. BGoodwill Rs 1,00,000; carrying amount Rs 14,00,000
3. CGoodwill Rs 12,00,000; carrying amount Rs 13,80,000
4. DGoodwill Rs 1,00,000; carrying amount Rs 14,20,000