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

Tarini Ltd acquires 30% of Vasudha Ltd for ₹80 crore and obtains significant influence. On the acquisition date, Tarini's share of the net fair value of Vasudha's identifiable assets and liabilities is ₹84 crore. Under Ind AS 28 as notified in India, how is the ₹4 crore excess treated?

Under Ind AS 28, if the investor's share of the net fair value of the associate's identifiable assets and liabilities exceeds the cost of investment, the excess is recognised in capital reserve. This differs from IAS 28, which recognises it in profit or loss, because Ind AS follows the approach used in Ind AS 103.

  1. ARecognised as income in Tarini's statement of profit and loss in the period of acquisition
  2. BRecognised in capital reserve, and the investment carrying amount is adjusted accordinglyCorrect
  3. CDeducted from goodwill on other investments of Tarini
  4. DRecognised in other comprehensive income and reclassified on disposal

Explanation

Ind AS 28 paragraph 32(b) is modified, in line with Ind AS 103, so that the excess of the investor's share of net fair value over the cost of investment is transferred to capital reserve. IAS 28 takes it to profit or loss, so the first option is the IAS treatment and is wrong under Ind AS.

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