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CA Final · Financial Reporting · Consolidated Financial Statements

Anand Ltd has subsidiary Bharat Ltd with a year-end of 31 January, while Anand's year-end is 31 March. Bharat is not able to prepare statements at 31 March. In the prior year the gap was also two months. Anand's accountant proposes this year to use Bharat's 31 October statements (a gap of five months) to save time. Under Ind AS 110 as reproduced, what is the position?

The proposal is not acceptable. Ind AS 110 says the difference between the subsidiary's and the consolidated statements' dates must be no more than three months in any case, and the gap must stay the same from period to period. A five-month gap breaches the limit, and adjustments cannot cure it.

  1. AAcceptable, because the subsidiary is only a minor part of the group
  2. BAcceptable if the five-month gap is disclosed in the notes
  3. CNot acceptable, as the difference between the dates can be no more than three months and must be consistent from period to periodCorrect
  4. DAcceptable if a significant-transaction adjustment is made for the gap

Explanation

The text states that in any case the difference between the dates shall be no more than three months, and that the length of reporting periods and the date difference must be the same from period to period. A five-month gap breaches the cap, and also changes from the prior two months. Adjustments for significant events do not cure a gap above three months.

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