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AS 27

AS 27. Financial Reporting of Interest in Joint Venture. 1. This AS is not Mandatory. 2. Joint Venture means Contractual Arrangement between two or more parties to govern any Economic Activity . Such Entity / Economic activity is Subject to Joint Control.

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AS 27

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  1. AS 27 Financial Reporting of Interest in Joint Venture

  2. 1. This AS is not Mandatory. 2. Joint Venture means Contractual Arrangement between two or more parties to govern any Economic Activity. Such Entity / Economic activity is Subject to Joint Control. 3. Joint Control means power to govern financial and / or Operating matters of entity on Sharing basis.

  3. Control 1. Voting Power 50 % or more ORAS 21 2. Power to Compose General Body AS 18 OR 3. Substantial Interest and Power to Direct Financial / Operating Matters 4. Power to govern Fin. / Op. Matters AS 27 5. Power to Participate AS 23 (significant Influence)

  4. 5. Joint Venture is of Three Type :

  5. 6. Joint Control Asset JCA means where two or more parties jointly owns any asset. For e.g: Oil pipeline owned by Indian Oil Co. Ltd & BPCL Ltd. Separate Books of accounts are not prepared for such jointly owned asset. Consolidation is not required since separate Books does not exists. In case of JCA, Share in Asset, Joint Liability, Income and Expense will be reported in Standalone Statement.

  6. Accounting Treatment in Books of Joint Venture Balance Sheet of One of the Joint Venturer Share in JCA Share in Liability (in case loan taken to make that asset) Profit & Loss of One of the Joint Venturer By Share in Income (In case any add income is earned) To Share in Expenses

  7. 7. Joint Control Operation Where Operations are jointly conducted Generally this is done for economy of Operation. In such Books of account of JCO are not maintained. Hence no consolidation. Share in Income, Expenses and Liability will be reported in Stand alone Statement of venturer.

  8. 8. Transaction Between Venturers and JV in case of JCO/ JCA Venturer will not earn profit by selling/ Purchase of asset of its own shares in JV. Venturer can recognize loss from transactions, if such loss is real/ supported by decline in Market Price.

  9. 9. Joint Control Entity Under this type of JV, a new entity is created for operation of JV. Such entity maintain its own Books of Account and such entity is consolidated using Proportionate Consolidation Method. Under Proportionate Consolidation Method : • Assets and Liabilities are consolidated on Line by Line Basis, Proportionately. • Minority Interest is not recorded. • Calculation of GW/ CR is similar to AS 21.

  10. 10. Disclosure Requirement • Nature of Joint Venture • If Investment in JV are disclosed during the year, than fact should be disclosed. • If Financial Statement of JCE are not updated before consolidation, fact should be maintained. • Any Contingent Liability of JV should be reported in Venturer Book as contingent Liability to the extent expected.

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