The loan needs two linked measurement records
Ind AS 28 paragraph 14A requires Ind AS 109 to be applied to the stated financial instruments, including long-term interests forming part of net investment, before paragraph 38 and paragraphs 40–43. In the Ind AS 109 step, disregard carrying-amount adjustments arising from Ind AS 28. Checked on 28 October 2026 against ICAI's current compendium, this guide addresses that long-term-interest sequence for an equity-accounted associate or joint venture. It is a different working from the general AS 23 investment bridge. The examples stipulate the appropriate Ind AS 109 measurements; they do not substitute a fixed percentage for an actual expected-credit-loss assessment. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A. ICAI’s 14 October 2026 exposure draft invites comments until 14 November 2026. It is a proposal and does not itself amend the notified standard; the working here follows the cited notified-standard provisions.
Classify the net investment from substantive settlement evidence
Paragraph 38 includes equity-method investment and long-term interests that in substance extend the net investment, such as the stated receivables or loans whose settlement is neither planned nor likely in the foreseeable future. It excludes trade receivables, trade payables and adequately collateralised long-term receivables such as the specified secured loans. A long contractual maturity alone does not settle this classification. Keep repayment plans, realistic cash flows, collateral adequacy and instrument terms with the accounting conclusion. Financial instruments outside the net-investment loss-allocation population still need their own applicable accounting. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A.
Apply financial-instrument measurement before associate loss allocation
For each qualifying long-term interest, retain an Ind AS 109 measurement basis, including applicable impairment, separately from accumulated Ind AS 28 allocations. A displayed net carrying amount after an equity-method loss is not automatically the new principal or measurement base for the next Ind AS 109 calculation. Paragraph 14A and Appendix A show this separation across successive years. Reconcile current measurement movements first, then use the resulting available carrying amounts in the equity-method working. Avoid both ignoring an applicable credit loss and measuring it a second time against a balance already reduced by associate-loss allocation. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A.
Use reverse seniority for losses beyond ordinary shares
Paragraph 38 applies equity-method losses beyond the ordinary-share investment to other components in reverse order of seniority in liquidation. Read actual instrument priority, not the order of rows in the trial balance. A junior qualifying preference interest can absorb losses before a senior qualifying loan. Track allocations by instrument and period, including the point at which the combined interest reaches zero. Under paragraph 39, further losses give rise to a liability only to the extent of the stated legal/constructive obligations or payments on behalf of the investee. A negative associate net worth does not by itself establish the investor's obligation for every excess loss. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A.
Maintain suspended losses even when the investee has no current profit
A memorandum of unrecognised share of losses is needed after recognition stops. Later Ind AS 109 increases in the long-term interests can restore capacity for previously unrecognised losses; Appendix A illustrates allocation of those losses after financial-instrument remeasurement even without a new investee profit in that period. Do not treat an expected-credit-loss reversal as an unrestricted recovery of the displayed net asset without running the subsequent Ind AS 28 step. Retain distinct instrument-measurement, equity-method allocation and unrecognised-loss movements. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A.
Reverse allocations with their history attached
When the investee reports subsequent profits, paragraph 39 requires the stated catch-up of unrecognised losses before recognition resumes. Appendix A then illustrates recovery allocations by seniority, limiting restoration of a long-term component to its prior equity-method loss allocations and leaving the residual for ordinary shares. Use actual history rather than proportionately spreading every recovery across all balances. Finally apply the required net-investment impairment review in paragraphs 40–43; an orderly loss-allocation spreadsheet is not itself proof of recoverability. Exemptions from the equity method, separate-financial-statement measurement, tax and changed ownership require separate analysis. ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A.
Applicable primary references
ICAI Ind AS 28, 2025–26: paragraphs 14A, 38–43 and Appendix A
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Screen the interest population
Assume ordinary investment ₹3,00,000, an otherwise qualifying unsecured long-term net-investment loan ₹2,00,000, trade receivable ₹1,00,000 and an adequately collateralised loan ₹80,000. With classification otherwise established and before any required measurement adjustments, the paragraph 38 loss-allocation population is ₹5,00,000, not total balances ₹6,80,000. The excluded ₹1,80,000 still needs its own accounting.
Illustrative example 2: Measure the loan under Ind AS 109 first
Assume the qualifying loan's supported amortised-cost amount before loss allowance is ₹3,00,000 and applicable Ind AS 109 loss allowance is ₹30,000. Its post-109 amount is ₹2,70,000. With ordinary equity-method investment ₹1,00,000 and no prior Ind AS 28 loan allocation, available combined interest is ₹3,70,000. The allowance is a stipulated valid input, not a prescribed 10% rule.
Illustrative example 3: Allocate an excess share of loss to the qualifying loan
Assume ordinary investment ₹1,00,000, qualifying loan post-109 amount ₹2,70,000, no other interests or obligations, and the investor's properly determined share of associate loss ₹3,00,000. Allocate ₹1,00,000 to ordinary investment and ₹2,00,000 to the loan. Closing ordinary investment is zero; loan after the separate Ind AS 28 allocation is ₹70,000. The loan's pre-allocation Ind AS 109 record remains separately traceable at ₹2,70,000.
Illustrative example 4: Stop at the remaining interest and record the excess
Assume the next period has no Ind AS 109 movement, ordinary investment zero, loan net carrying amount ₹70,000 and a new share of loss ₹1,00,000. With no paragraph 39 obligation or payment, recognise ₹70,000 further loss, reduce the loan to zero and record ₹30,000 unrecognised. The share-of-loss total and recognised amount are not interchangeable.
Illustrative example 5: Restored capacity can absorb suspended losses
In a separate scenario, assume qualifying interests are at zero and unrecognised losses are ₹30,000. A valid current Ind AS 109 remeasurement increases the loan's available amount by ₹20,000, with no new associate result or other movement. Applying the Appendix A sequence, allocate ₹20,000 of previously unrecognised losses to that restored amount: the displayed loan returns to zero and the unrecognised-loss memorandum falls to ₹10,000. The ₹20,000 financial-instrument gain and ₹20,000 equity-method loss are separate entries.
Illustrative example 6: Recover by seniority and respect prior allocation limits
Assume current Ind AS 109 measurements have already been applied with no new movement. The senior qualifying loan has a ₹90,000 measurement basis fully reduced by prior Ind AS 28 allocations ₹90,000; a junior qualifying preference interest has a ₹40,000 basis fully reduced by allocations ₹40,000; ordinary investment is also zero. Assume new properly determined profit share ₹1,80,000 and suspended losses ₹20,000. The first ₹20,000 clears the memorandum; recognised recovery is ₹1,60,000. Restore the senior loan by ₹90,000 to ₹90,000, preference interest by ₹40,000 to ₹40,000 and allocate residual ₹30,000 to ordinary investment. Combined closing carrying amount is ₹1,60,000, compared with opening zero. No obligations, instrument changes or other movements affect this model.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the accounting framework and scope | Ind AS equity method, associate/JV conclusion and exceptions |
| 2 | Inventory every instrument | Ordinary shares, preference interests, loans and receivables |
| 3 | Establish substantive net-investment classification | Settlement evidence, collateral and paragraph 38 exclusions |
| 4 | Document liquidation seniority | Contractual ranking and actual instrument rights |
| 5 | Apply the appropriate Ind AS 109 measurement | Separate supported basis and applicable loss allowance |
| 6 | Reconcile prior Ind AS 28 allocations | Instrument-wise cumulative losses kept outside the 109 basis |
| 7 | Allocate current and previously unrecognised losses | Available amounts and reverse-seniority sequence |
| 8 | Assess obligations beyond zero | Legal/constructive obligations and payments on behalf |
| 9 | Reconcile recovery and suspended-loss history | Profit catch-up, seniority and restoration caps |
| 10 | Complete impairment and financial-statement review | Paragraphs 40–43 and final linked instrument/net-investment records |
Sixteen practitioner FAQs
1. Is this the same as an AS 23 associate bridge?
No. It focuses on the Ind AS 109 and Ind AS 28 long-term-interest sequence.
2. Which step comes first for covered financial instruments?
Apply Ind AS 109 before the stated Ind AS 28 loss and impairment provisions.
3. Do Ind AS 28 allocations alter the next Ind AS 109 basis automatically?
Paragraph 14A requires disregarding those allocations in that measurement step.
4. Does every long-dated receivable form part of net investment?
No. Establish substantive settlement facts and the standard's conditions.
5. Are trade receivables included in paragraph 38's stated population?
The paragraph expressly excludes them.
6. What about adequately collateralised long-term receivables?
They are within paragraph 38's stated exclusions.
7. Does exclusion remove financial-instrument accounting obligations?
No. Apply their own relevant accounting requirements.
8. Is the illustrative ₹30,000 allowance a statutory percentage?
No. It is an assumed properly measured accounting input.
9. Where do losses go after the ordinary-share investment is exhausted?
To other covered components in reverse order of liquidation seniority.
10. Can spreadsheet row order determine that seniority?
No. Use instrument rights and supporting terms.
11. Does an investee deficit require unlimited investor loss recognition?
Paragraph 39 limits the stated recognition beyond zero to the relevant obligations or payments.
12. Should unrecognised losses be discarded?
No. Keep a separate memorandum for subsequent periods.
13. Can an Ind AS 109 increase create capacity for old suspended losses?
Appendix A illustrates that sequence.
14. Can the first later profit be recognised without reviewing suspended losses?
No. Apply paragraph 39's catch-up requirement.
15. Can a recovery restore a loan beyond its prior equity-method allocation solely under this step?
Appendix A's recovery sequence limits that restoration to prior allocations; measure other changes separately.
16. Does completing loss allocation replace the impairment review?
No. Apply the required paragraphs 40–43 review as well.
Conclusion
Keep financial-instrument measurement separate from equity-method loss allocations, classify net-investment interests correctly, and reconcile suspended losses and later recoveries.