Skip to content

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

Sutlej Ltd owns 30% of Beas Ltd, an associate, carried at Rs 30,00,000 under the equity method. Beas sold goods costing Rs 6,00,000 to Sutlej for Rs 8,00,000 (upstream), and Sutlej still holds all of them at year end. Beas reported a profit of Rs 40,00,000 before considering this adjustment. Ignoring tax, what is Sutlej's share of Beas's profit recognised for the year?

Sutlej recognises Rs 11,40,000. Its 30% share of Beas's profit is Rs 12,00,000, from which its 30% share of the unrealised profit on inventory still held, Rs 60,000, must be eliminated, because upstream transaction profits are recognised only to the extent of unrelated investors' interests.

  1. ARs 11,40,000Correct
  2. BRs 12,00,000
  3. CRs 11,60,000
  4. DRs 12,60,000

Explanation

Unrealised profit on upstream sale is 8,00,000 - 6,00,000 = 2,00,000. Investor's share is 30% x 2,00,000 = 60,000. Share of profit is 30% x 40,00,000 = 12,00,000, less 60,000 gives 11,40,000. Option B ignores the elimination of unrealised profit.

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