Question

A 40% joint operator in a jointly controlled operation sells an asset to the joint operation. The asset has a fair value of $5 000 000. The carrying amount in the books of the joint operator was $4 000 000. The profit to be recognised by the seller is:

		$600 000.
		$1 000 000.
		None of the rest
		$400 000.

Answer 1

Solution: The answer is $600,000.

Total profit = Fair Value - Carrying Cost

= $5,000,000 - $4,000,000 = $1,000,000

Profit to be recognised by the seller to the extent of interest of other operators in a jointly controlled operations i.e. 60% = $1,000,000 * 60% = $600,000

When a operator contributes or sells assets to a jointly controlled operation and has transferred the significant risks and rewards of ownership, the operator shall recognize only the portion of the gain or loss that is attributable to the interests of the other operators.

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