Page 5 - 18. COMPILER QB - INDAS 28 _ 111

In the present case, in accordance with paragraph 19 of Ind AS 28, P must follow equity method of

accounting for its 10% interest held by Y, even though Y would not have significant influence on a stand-
alone basis. Under the partial use of fair value exemption, the P may elect to measure the 30% interest held

by X at fair value through profit or loss.

Q3. (IND AS 111 - May 20)

AB Limited and BC Limited establish a joint arrangement through a separate vehicle PQR, but the legal form
of the separate vehicle does not confer separation between the parties and the separate vehicle itself. Thus,

both the parties have rights to the assets and obligations for the liabilities of PQR. As neither the contractual
terms nor the other facts and circumstances indicate otherwise, it is concluded that the arrangement is a

joint operation and not a joint venture.
Both the parties own 50% each of the equity interest in PQR. However, the contractual terms of the joint

arrangement state that AB Limited has the rights to all of Building No. 1 owned by PQR and the obligation to
pay all of the debt owed by PQR to a lender XYZ. AB Limited and BC Limited have rights to all other assets

in PQR, and obligations for all other liabilities of PQR in proportion to their equity interests (i.e. 50% each).

PQR's summarized balance sheet is as follows:
(Rs. in crore)

Amount
Building 1 240
Building 2 200

Cash 40
Total Assets 480
Equity 140
Debt owed to XYZ 240

Employee benefit plan obligation 100
Total Liabilities 480

How would AB Limited present its interest in PQR in its financial statements?
SOLUTION

Paragraph 20 of Ind AS 111 states that “a joint operator shall recognise in relation to its interest in a joint

operation:
(a) its assets, including its share of any assets held jointly;
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