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

Rohan Ltd holds 30% of Tara Ltd (associate). During 2025-26 Rohan sold goods costing Rs 6,00,000 to Tara for Rs 8,00,000. At year end Tara still holds 50% of these goods. Tara's profit for the year was Rs 10,00,000. Rohan's investment in Tara was Rs 15,00,000 at the start of the year. What is the closing carrying amount of the investment in the consolidated balance sheet, using AS 23 treatment of unrealised profit?

The closing carrying amount is Rs 17,70,000. Rohan's share of Tara's profit is Rs 3,00,000, but the unrealised profit in closing stock, Rs 1,00,000, is eliminated to the extent of Rohan's 30% interest, Rs 30,000. So 15,00,000 + 3,00,000 - 30,000 gives Rs 17,70,000.

  1. ARs 17,70,000Correct
  2. BRs 18,00,000
  3. CRs 17,40,000
  4. DRs 18,30,000

Explanation

Total profit on sale = 2,00,000; unrealised on goods held = 50% x 2,00,000 = Rs 1,00,000. Rohan's share = 30% x 1,00,000 = Rs 30,000, eliminated from the investment. Share of Tara's profit = 30% x 10,00,000 = Rs 3,00,000. Closing = 15,00,000 + 3,00,000 - 30,000 = Rs 17,70,000. Rs 18,00,000 ignores the elimination; Rs 17,40,000 wrongly eliminates 60,000 (double).

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