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

An investment entity holds two subsidiaries: Sub A, whose main purpose and activities are providing investment-advisory support services to the investment entity, and Sub B, a manufacturing company. Under Ind AS 110, what is the correct treatment?

Sub A, the service-providing subsidiary, is consolidated with Ind AS 103 applied on acquisition, while Sub B, the manufacturing subsidiary, is measured at fair value through profit or loss. Ind AS 110 limits the consolidation exception to subsidiaries that are not investment-service providers.

  1. AConsolidate both A and B
  2. BConsolidate neither; measure both at fair value through profit or loss
  3. CConsolidate A and apply Ind AS 103 to its acquisition; measure B at fair value through profit or lossCorrect
  4. DConsolidate B and measure A at fair value through profit or loss

Explanation

Paragraph 32 requires consolidation of a subsidiary that is not itself an investment entity and whose main purpose is providing services relating to the investment entity's investment activities, applying Ind AS 103 on acquisition. Sub B falls under paragraph 31 and is measured at fair value through profit or loss. Consolidating B would be wrong because it does not provide such services.

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