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CS Executive · Corporate Accounting and Financial Management · Consolidation of Accounts

A parent acquired a subsidiary on 1 April 2025. Under Ind AS 110, the subsidiary's plant was recognised in the consolidated statements at a fair value of Rs 50,00,000 against a book value of Rs 40,00,000 in the subsidiary's books, with a remaining life of 10 years on straight line basis. What depreciation on this plant should be charged in the consolidated statement of profit and loss for the year ended 31 March 2026?

Rs 5,00,000 is charged, because depreciation in consolidated statements is based on the fair value of the plant at the acquisition date, Rs 50,00,000 over 10 years. Using the subsidiary's book value of Rs 40,00,000 would understate the consolidated expense.

  1. ARs 4,00,000
  2. BRs 5,00,000Correct
  3. CRs 1,00,000
  4. DRs 9,00,000

Explanation

Ind AS 110 says the subsidiary's income and expenses are based on the assets recognised in the consolidated statements at the acquisition date, so depreciation uses fair value: 50,00,000/10 = Rs 5,00,000. Rs 4,00,000 uses the subsidiary's book value, which is the mistake. Rs 1,00,000 is only the extra depreciation.

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