Page 13 - 18. COMPILER QB - INDAS 28 _ 111

SOLUTION

Ind AS 28 defines the equity method as “a method of accounting whereby the investment is initially

recognised at cost and adjusted thereafter for the post -acquisition change in the investor’s share of the
investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the

investor’s other comprehensive income includes its share of the investee’s other comprehensive income.”
Ind AS 28, states, inter alia, that when an associate or joint venture has subsidiaries, associates or joint

ventures, the profit or loss, other comprehensive income, and net assets taken into account in applying the
equity method are those recognised in the associate’s or joint venture’s financial statements (including the

associate’s or joint venture’s share of the profit or loss, other comprehensive income and net assets of its
associates and joint ventures), after any adjustments necessary to give effect to uniform accounting policies.

The change of interest in the net assets / equity of the associate as a result of the investee’s equity

transaction is reflected in the investor’s financial statements as ‘share of other changes in equity of investee’
(in the statement of changes in equity) instead of gain in Statement of profit and loss, since it reflects the
post-acquisition change in the net assets of the investee as per the provisions of Ind AS 28 and also

faithfully reflects the investor’s share of the associate’s transaction as presented in the associate’s

consolidated financial statements.
Thus, in the given case, Entity H recognizes Rs 200 as change in other equity instead of in statement of

profit and loss and maintains the same classification as of its associate, Entity S, i.e., a direct credit to equity
as in its consolidated financial statements.

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