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CMA Final · Corporate Financial Reporting · Consolidated Financial Statements and Separate Financial Statements

Under Ind AS 28 paragraph 44, an investment in an associate in the investor's separate financial statements is accounted for in accordance with paragraph 10 of Ind AS 27. X Ltd bought a 40% associate stake for Rs 5,00,000. The associate earned a profit of Rs 2,00,000 in the year. X Ltd's separate financial statements elect to carry the investment at cost. What carrying amount appears in X Ltd's separate balance sheet, ignoring impairment?

The carrying amount is Rs 5,00,000. In separate financial statements the associate investment is accounted for as per Ind AS 27, and under the cost option it is not adjusted for the associate's profits. The equity method share of profit applies only in consolidated statements.

  1. ARs 5,80,000
  2. BRs 5,00,000Correct
  3. CRs 4,20,000
  4. DRs 7,00,000

Explanation

In separate financial statements under the cost option, the investment stays at cost, Rs 5,00,000; the investee's profit is not added. Rs 5,80,000 applies the equity method (5,00,000 + 40% x 2,00,000), which is used in consolidated statements, not under the cost option in separate statements.

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