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Respected mike :
Ejoy enter iinto joint venture with another company.ejoy has contributed asset at fair value of 20$ m(carring value 14 m)each party will hold 5 m shares of 1$.the gain on disposal of the asset 6$m to joint venture has been included in other income.
kindly reply me urgently about how this will be accounted for in FS
The interest in the joint venture should be equity accounted as though it were an associate. But in the same way that we eliminate the group’s share of any unrealised profits that relate to trading with an associate, we must do this also with a joint venture.
Of the $6 million that has been credited to “Other income” therefore, we need to eliminate Ejoy’s 50% and so we need to reduce Ejoy’s retained earnings by that $3 million