Skip to content

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

Shivalik Ltd acquires 30% of the equity shares of Narmada Ltd and gains significant influence. The cost of the investment is ₹50 crore. Shivalik's share of the net fair value of Narmada's identifiable assets and liabilities is ₹54 crore. Under Ind AS 28, how is the excess of ₹4 crore treated?

Under Ind AS 28, any excess of the investor's share of the net fair value of the investee's identifiable assets and liabilities over the cost of the investment is not taken to profit or loss. Following Ind AS 103, it is transferred to capital reserve, unlike IAS 28, which recognises it in profit or loss.

  1. ATransferred to capital reserve, in line with Ind AS 103Correct
  2. BRecognised as income in the statement of profit and loss of the period
  3. CDeducted from the carrying amount of the investment as negative goodwill
  4. DCarried as a deferred credit and amortised over five years

Explanation

Ind AS 28 (para 32(b)) was modified on the lines of Ind AS 103. The excess of the investor's share of the net fair value of the investee's identifiable assets and liabilities over the cost of the investment goes to capital reserve. IAS 28 would take it to profit or loss, so option B reflects IAS 28 and is wrong for Ind AS.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 28 Investments in Associates and Joint Ventures shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 28 Investments in Associates and Joint VenturesFree diagnostic mock

More Ind AS 28 Investments in Associates and Joint Ventures questions