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CA Intermediate · Advanced Accounting · AS 27 Financial Reporting of Interests in Joint Ventures

Under AS 27, a venturer in its consolidated financial statements reports its interest in a jointly controlled entity using proportionate consolidation. In which circumstance must the venturer stop using proportionate consolidation?

Proportionate consolidation must stop when the venturer ceases to have joint control over the jointly controlled entity. Neither a lower profit share, losses nor a small difference in reporting dates ends joint control. The standard ties consolidation to the existence of joint control from the date it is lost.

  1. AWhen the venturer's share in profits falls below 50%
  2. BWhen the venturer ceases to have joint control over the entityCorrect
  3. CWhen the jointly controlled entity incurs a loss
  4. DWhen the entity's accounting year differs from the venturer's by two months

Explanation

AS 27 requires discontinuing proportionate consolidation from the date the venturer ceases to have joint control. Profit share below 50% or a loss does not by itself end joint control, and a differing reporting date is handled by adjustments for significant transactions, not by discontinuing consolidation.

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