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

Vihaan Ltd acquired a 50% interest in a jointly controlled entity, Zenith Ltd, which is a joint venture under AS 27. Vihaan's separate financial statements show this investment. Under AS 27, in Vihaan's separate financial statements the interest in Zenith should be:

In Vihaan's separate financial statements the interest in Zenith is accounted for as an investment under AS 13, at cost less any permanent diminution. Proportionate consolidation is used only in consolidated financial statements, and AS 27 does not prescribe the equity method for jointly controlled entities.

  1. AAccounted for as an investment in accordance with AS 13Correct
  2. BProportionately consolidated line by line
  3. CAccounted for using the equity method
  4. DShown at net asset value of Zenith

Explanation

In separate financial statements of the venturer, the interest in a jointly controlled entity is accounted for as an investment under AS 13. Proportionate consolidation applies only in consolidated financial statements. The equity method is not the AS 27 treatment for jointly controlled entities.

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