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

Vindhya Ltd holds 25% of Satpura Ltd, an associate. The opening carrying amount of the investment is ₹40 crore. During the year, Vindhya sold goods costing ₹8 crore to Satpura for ₹10 crore. By year end, Satpura had sold 60% of these goods to outsiders, and 40% remain in its closing inventory. Satpura's profit for the year is ₹12 crore (before any adjustment for this transaction), and no dividend was paid. What is the closing carrying amount of the investment under Ind AS 28?

The share of Satpura's profit is ₹3 crore. Unrealised profit in the unsold inventory is ₹0.8 crore, but for a downstream sale only the investor's 25% share, ₹0.2 crore, is eliminated. The closing carrying amount is therefore 40 plus 3 less 0.2, which equals ₹42.8 crore.

  1. A₹42.8 croreCorrect
  2. B₹43.0 crore
  3. C₹42.2 crore
  4. D₹42.5 crore

Explanation

The share of profit is 25% × 12 = ₹3 crore. Unrealised profit in the closing inventory is (10 − 8) × 40% = ₹0.8 crore. For a downstream sale, only the investor's interest is eliminated: 25% × 0.8 = ₹0.2 crore. Closing carrying amount is 40 + 3 − 0.2 = ₹42.8 crore. Option C eliminates the full 0.8 crore. Option D eliminates 25% of the entire ₹2 crore profit, ignoring that 60% was sold on.

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