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AS 23 (legacy Indian GAAP) allowed an investor's share of losses in an associate to be recognised only to the extent of the carrying amount of the investment. Under Ind AS 28:
AAll losses must be recognised through P&L irrespective of carrying amount
BLosses are recognised against the equity-method carrying amount PLUS any long-term interests that, in substance, form part of the entity's net investment in the associate/JV
CLosses are deferred and recognised on disposal
DSame — losses recognised only to the extent of equity carrying amount
Answer & Solution
Correct answer: B. Losses are recognised against the equity-method carrying amount PLUS any long-term interests that, in substance, form part of the entity's net investment in the associate/JV
Ind AS 28 expands the 'sponge' to absorb losses beyond the pure equity-method carrying amount — long-term receivables / loans that form part of the entity's net investment (in substance permanent funding) absorb further losses before zero is reached. This is a documented Ind AS 28 vs AS 23 difference.
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