AS 27 (Financial Reporting of Interests in Joint Ventures) is the Indian Accounting Standard prescribing how enterprises must account for and report interests in joint ventures in their consolidated and standalone financial statements.

The Ministry of Corporate Affairs (MCA) notified AS 27 through the Companies (Accounting Standards) Rules, 2006. Its effective date is 1 April 2002 for Level I enterprises and listed companies. The standard was issued by the Institute of Chartered Accountants of India (ICAI) as part of the original set of group reporting standards.

For FY 2026-27, AS 27 remains highly relevant for companies outside the Ind AS regime. In infrastructure and energy sectors, joint ventures are common, proportionate consolidation under AS 27 can significantly affect reported assets and liabilities.

AS 27 at a Glance

AS 27 prescribes how an enterprise must account for its interests in joint ventures. The core principle is proportionate consolidation, each venturer combines its share of assets, liabilities, income and expenses line-by-line in consolidated financial statements. The primary users are Level I enterprises and listed companies preparing CFS under the Accounting Standards framework.

What is AS 27: Financial Reporting of Interests in Joint Ventures?

AS 27 sets out principles for recognising and measuring an enterprise’s interest in joint ventures. It requires venturers to combine their share of each asset, liability, income and expense from jointly controlled entities directly into their consolidated financial statements using proportionate consolidation.

The ICAI introduced this standard to bring consistency and transparency to group reporting involving joint arrangements. Before its introduction, there was diversity in accounting practices for joint ventures across Indian companies. With global convergence towards IFRS standards like IFRS 11 and Ind AS 111, proportionate consolidation remains unique to the Indian GAAP regime.

Statutory auditors, CFOs and finance teams at Level I enterprises most frequently apply this standard when preparing or reviewing consolidated accounts involving joint ventures.

Objective of AS 27

The objectives of AS 27 are:

• Establish principles and procedures for accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses.
• Prescribe proportionate consolidation as the accounting method for jointly controlled entities in consolidated financial statements.
• Distinguish jointly controlled operations, jointly controlled assets and jointly controlled entities.

These objectives ensure that users receive a true and fair view as required by Section 129 of the Companies Act, 2013. Accurate reporting under this standard enables stakeholders to understand both the financial position and performance relating to an entity’s participation in joint arrangements.

Who Must Apply AS 27?

Entities covered

The following table summarises which entities must comply with AS 27:

Level I enterprises include those with turnover exceeding Rs 50 crore or borrowings over Rs 10 crore as per ICAI criteria. Listed companies must apply all notified Accounting Standards including AS 21 (CFS), so if they have a JV interest they must apply AS 27.

Scope exclusions

AS 27 does not apply to:

• Investments in joint ventures held by venture capital funds or mutual funds (covered by other standards).
• Joint ventures classified as held for sale or disposal.

When the standard does not apply

Investments held by venture capital funds or mutual funds are covered under other specific standards such as those governing investment entities or mutual fund accounting frameworks. For JVs classified as held-for-sale or disposal groups, relevant guidance comes from standards on discontinued operations or asset disposals rather than from AS 27 itself.

Key Definitions under AS 27

Recognition and Measurement under AS 27

When to recognise

An entity recognises its interest in a joint venture when a contractual arrangement establishing joint control becomes effective. Classification depends on whether it is a jointly controlled operation, asset or entity based on legal structure and contract terms.

For jointly controlled operations or assets, recognition occurs when activities commence or assets are contributed/acquired according to agreement terms. For jointly controlled entities (JCEs), recognition starts once legal formation is completed and control is established contractually among venturers.

Initial measurement

Jointly controlled operations:

The venturer recognises its share of assets used in operations directly on its balance sheet along with any liabilities incurred individually or jointly with other venturers. Revenue from sales/services arising from such operations is recognised as per agreed terms; no special accounting beyond normal recognition principles applies here.

Jointly controlled assets:

Each venturer recognises its share of such assets acquired/contributed specifically for JV purposes on initial contribution date at cost incurred by each party. Liabilities incurred individually or jointly are recognised accordingly; income from output sold is recognised when earned; expenses are recognised based on actual incurrence proportional to ownership/shareholding ratio.

Jointly controlled entities:

In consolidated financial statements (CFS), initial measurement follows proportionate consolidation, combining line-by-line each share of asset/liability/income/expense with similar items from own books at carrying amounts reflected by JV’s records at acquisition date.

In standalone financial statements (SFS), investments are measured at cost according to the principles laid out under AS 13.

Subsequent measurement

Proportionate consolidation continues at every balance sheet date until loss or change in joint control status occurs.

If a venturer sells/contributes an asset to a JV:

Only gain/loss attributable to other venturers’ interests is recognised immediately; gain/loss relating to own retained interest is deferred until realised via depreciation/amortisation within JV or ultimate sale outside group.

Losses resulting from such transactions are recognised only if they indicate impairment.

If there is loss/loss-of-control event:

Upon loss/reduction below significant influence threshold but retaining some interest, derecognise investment accordingly; any resultant gain/loss reflected immediately through profit/loss statement based on fair value computation.

If only partial reduction but still retaining joint control, eliminate corresponding portion from CFS using same line-by-line approach as above.

Proportionate Gain Recognised = Total Gain × % Interest Attributable To Other Venturers

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Deferred Gain = Total Gain × % Own Interest Retained

Proportionate Consolidation - Line-by-Line Share

The hallmark feature under AS 27 is mandatory use of proportionate consolidation for JCEs within CFS, not permitted under Ind AS 111 or IFRS 11.

Each venturer combines its direct share (e.g., if holding is 40%, then 40% of every asset/liability/income/expense line item) with corresponding items from own books.

For example:

If Maharashtra Holdings has a 50% JV with Krishna Industries where JV revenue totals Rs 100 crore with Rs 200 crore total assets,

Maharashtra Holdings includes Rs 50 crore revenue plus Rs 100 crore total assets into its CFS figures.

All inter-company balances/transactions between venturer/JV are eliminated only up to extent of own interest, not fully eliminated unless wholly owned JV.

This approach gives stakeholders granular visibility into underlying economic exposures but can create operational complexity if JVs have different policies/reporting periods compared to parent company.

Under Ind AS 111/IFRS 11 only equity method applies, showing just one “investment” line plus “share of profit” rather than full breakdown via line-by-line approach mandated here.

Worked Examples on AS 27

Example 1: Proportionate consolidation - JV in CFS

Scenario:

Sundaram Engineering owns a 40% stake in Sundaram-Maharashtra JV which qualifies as a jointly controlled entity per contract terms.

JV standalone results:

Revenue Rs 200 crore

Profit before tax Rs 30 crore

Total assets Rs 250 crore

Total liabilities Rs 150 crore

Computation Table

Net effect on CFS net assets = Assets, Liabilities = Rs 100, Rs 60 = Rs 40 crore (= carrying value).

Journal Entry:

No standalone journal entry required; CFS working involves adjusting each reported item by Sundaram's share (40%) during group consolidation process. Inter-company balances eliminated up to this percentage only.

Example 2: Sale of asset to JV - partial gain elimination

Scenario:

Maharashtra Industries holds a 50% stake in Maharashtra-Krishna JV.

It sells equipment costing Rs 6 crore to the JV at sale price Rs 10 crore; profit booked = Rs 4 crore.

Computation Table

Journal Entry:

Standalone books:

Dr Bank/JV Receivable Rs 10 crore

Cr Equipment Rs 6 crore

Cr Profit on Sale Rs 4 crore

CFS adjustment:

Dr Profit on Sale Rs 2 crore

Cr Deferred Gain on Equipment Sale Rs 2 crore

This eliminates profit attributable to Maharashtra's retained interest until realised through depreciation/amortisation within JV or ultimate sale outside group context.

Disclosure Requirements under AS 27

Disclosures under AS 27 are critical for users of financial statements to assess the nature, extent, and financial effects of an entity’s interests in joint ventures. Schedule III to the Companies Act, 2013, reinforces transparency and comparability by requiring detailed disclosures on group arrangements, including joint ventures.

Statutory auditors must ensure these disclosures are complete and accurate to meet true and fair presentation as required by SA 700.

Common Mistakes & Industry-Specific Considerations

Common errors auditors flag

• Applying equity method instead of proportionate consolidation (the Ind AS 111 approach, not AS 27).
• Failing to eliminate inter-company transactions to the extent of venturer's interest (full elimination is incorrect; only proportionate elimination).
• Not deferring gain on sale of asset to JV proportionate to own interest.
• Inconsistent JV reporting period with venturer (timing differences ignored).
• Not classifying contingent liabilities of JV separately from own contingent liabilities.
• Treating jointly controlled operations as if they were jointly controlled entities (different accounting).

Industry application notes

In real estate, joint development agreements in tier-2 cities often qualify as jointly controlled assets. Each developer recognises its share of land, construction costs, and sale revenue directly in its books. This approach reflects the economic substance under AS 27.

Infrastructure SPVs such as toll road or port projects are frequently structured as jointly controlled entities. Proportionate consolidation brings the entire share into the venturer’s consolidated financial statements, often resulting in a significant impact on reported assets and borrowings.

In energy and mining sectors, joint ventures for exploration or production are widespread. Proportionate consolidation aligns reported results with how operations are managed, each partner records its share of output and related expenses directly.

AS 27 vs Ind AS 111 vs IFRS: Key Differences

The following table summarises key differences between AS 27 (Indian GAAP), Ind AS 111 (Indian Accounting Standards), and IFRS 11 (International Financial Reporting Standards) for joint venture accounting:

India’s carve-out is the continued use of proportionate consolidation for jointly controlled entities under AS 27. Globally, both Ind AS and IFRS require the equity method only for JVs in consolidated accounts. Indian companies outside the Ind AS regime must follow this unique approach until a future convergence eliminates it.

Latest Amendments to AS 27 (FY 2026-27)

No amendments have been notified to AS 27 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.

Related Standards You Should Know

• [Ind AS 111](/ind-as-111-joint-arrangements/), Equivalent joint arrangements standard for Ind AS-applicable companies; mandates equity method.
• [AS 21](/as-21-consolidated-financial-statements/), Consolidation framework for subsidiaries - parallel for JVs.
• [AS 23](/as-23-accounting-for-investments-in-associates/), Investments in associates - equity method (same standard for AS framework).
• [AS 13](/as-13-accounting-for-investments/), Standalone FS measurement of JV investment at cost.
• [AS 18](/as-18-related-party-disclosures/), JV is a related party of the venturer.

Need Help with AS 27 Compliance?

Patron Accounting LLP advises listed companies and large unlisted enterprises on full-scope compliance with AS 27 Financial Reporting of Interests in Joint Ventures. Our team brings deep experience from statutory audits and group reporting assignments across manufacturing, infrastructure, and energy sectors.

Our services include:

• Statutory Audit
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• Disclosure Review
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About This Article

Reviewed by CA & CS Team · Patron Accounting LLP

Technical reviewer: CA Sundram Gupta, FCA

Last reviewed: 2026-05-02

Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Accounting Standards) Rules, 2006 (reaffirmed in Companies (Accounting Standards) Rules, 2021)) · IFRS Foundation