Difference between Ind AS 31 on Interests in Joint Ventures and existing AS 27 on Financial Reporting of Interests in Joint Ventures

(i) The scope of Ind AS 31 specifically excludes joint venture investments made by venture capital organizations, mutual funds, unit trusts and similar entities including investment- linked insurance funds which are treated in accordance with Ind AS 39 Financial Instruments: Recognition and Measurement. The existing AS 27 does not make such exclusion.

(ii) Existing AS 27 provides that in some exceptional cases, an enterprise by a contractual arrangement establishes joint control over an entity which is a subsidiary of that enterprise within the meaning of Accounting Standard (AS) 21, Consolidated Financial Statements. In those cases, the entity is consolidated under AS 21 by the said enterprise, and is not treated as a joint venture. Ind AS 31 does not recognise such cases keeping in view the definition of control given in Ind AS 27.

(iii) Ind AS 31 provides that a venturer can recognise its interest in jointly controlled entity using either proportionate consolidation method or equity method. Existing AS 27 prescribes the use of proportionate consolidation method only.

(iv) Existing AS 27 requires application of the proportionate consolidation method only when the entity has subsidiaries and prepares Consolidated Financial Statements. Ind AS 31 requires proportionate consolidation of jointly controlled entities, even if the venturer does not have any subsidiary in financial statements other than separate financial statements.

(v) In case of separate financial statements under existing AS 27, interest in jointly controlled entity is accounted for as per AS 13, Accounting for Investments, i.e., at cost less provision for other than temporary decline in the value of investment. Ind AS 31 refers to Ind AS 27 in this regard, which requires it to be recognised at cost or in accordance with Ind AS 39.

(vi) An explanation has been given in existing AS 27 regarding the term ‘near future’ used in an exemption given from applying proportionate consolidation method, ie, where the investment is acquired and held exclusively with a view to its subsequent disposal in the near future. This explanation has not been given in Ind AS 31 , as such situations are now covered by Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations.

(vii) Existing AS 21 provides clarification regarding disclosure of venturer’s share in post-acquisition reserves of a jointly controlled entity. The same has not been dealt with in Ind AS 31.

(viii) Ind AS 31 specifically deals with the venturer’s accounting for non-monetary contributions to a jointly controlled entity. Existing AS 27 does not deal with this aspect. (ICAI)