Page 3 - 18. COMPILER QB - INDAS 28 _ 111

The borrowing cost incurred on constructing the property should under the principles of Ind AS 23 ‘Borrowing

Costs’, be included as part of the cost of the asset for the period of construction.
In this case, the relevant borrowing cost to be included is Rs50,00,000 (Rs10,00,00,000 x 10% x 6/12).

The total cost of the asset is RS40,50,00,000 (Rs40,00,00,000 + Rs50,00,000) Rs20,25,00,000 crores is
included in the property, plant and equipment of Alpha Ltd. and the same amount in the property, plant and

equipment of Gama Ltd.
The depreciation charge for the year ended 31 March 2018 will therefore be Rs1,01,25,000 (Rs40,50,00,000 x

1/20 x 6/12) RS50,62,500 will be charged in the statement of profit or loss of the company and the same
amount in the statement of profit or loss of Gama Ltd.

The other costs relating to the arrangement in the current year totallingRs54,00,000 (finance cost for the
second half year of Rs50,00,000 plus maintenance costs of RS4,00,000) will be charged to the statement of

profit or loss of Alpha Ltd. and Gama Ltd. in equal proportions- Rs 27,00,000 each.

Q2. (May 20 – IND AS 28)

An entity P (parent) has two wholly-owned subsidiaries - X and Y, each of which has an ownership interest
in an 'associate', entity Z. Subsidiary X is a venture capital organisation. Neither of the investments held in

associate Z by subsidiaries X and Y is held for trading. Subsidiary X and Y account for their investment in
associate Z at fair value through profit or loss in accordance with Ind AS 109 and using the equity method in

accordance with Ind AS 28 respectively.
How should P account for the investment in associate Z in the following scenarios?

Scenario 1: Where both investments in the associate result in significant influence on a stand-alone basis -
Subsidiary X and Y ownership interest in associate Z is 25% and 20% respectively.

Scenario 2: When neither of the investments in the associate results in significant influence on a stand-alone
basis, but do provide the parent with significant influence on a combined basis - Subsidiary X and Y

ownership interest in associate Z is 10% each.

Scenario 3: When one of the investments in the associate results in significant influence on a stand-alone
basis and the other investment in the associate does not result in significant influence on a stand-alone basis
- Subsidiary X and Y ownership interest in associate Z is 30% and 10% respectively.

Assume there is significant influence if the entity has 20% or more voting rights.

SOLUTION

Paragraph 18 of Ind AS 28 states that, “when an investment in an associate or a joint venture is held by, or
is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and

similar entities including investment-linked insurance funds, the entity may elect to measure investments in
those associates and joint ventures at fair value through profit or loss in accordance with Ind AS 109. An

entity shall make this election separately for each associate or joint venture, at initial recognition of the
associate or joint venture.”

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