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CMA Final · Corporate Financial Reporting · Consolidated Financial Statements and Separate Financial Statements

Alpha Ltd holds 80% of Beta Ltd. During the year Alpha sold goods costing ₹6,00,000 to Beta for ₹8,00,000, and all of these goods remained unsold in Beta's closing inventory. Under Ind AS 110, what is the amount of inventory (carrying value to the group) that should appear in the consolidated balance sheet in respect of these goods?

The inventory is shown at ₹6,00,000. Consolidated statements present the group as a single economic entity, so the ₹2,00,000 unrealised intragroup profit on goods still held by Beta is eliminated in full, bringing inventory back to the group's original cost.

  1. A₹8,00,000
  2. B₹6,00,000Correct
  3. C₹7,60,000
  4. D₹6,40,000

Explanation

Consolidated statements present the parent and subsidiaries as a single economic entity, so intragroup profit must be eliminated. The unrealised profit is 8,00,000 - 6,00,000 = 2,00,000, so inventory is stated at group cost of ₹6,00,000. Showing ₹8,00,000 ignores the elimination, and the 80% proportion does not apply to a full elimination for a subsidiary.

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