Skip to content

CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Ananya Industries Ltd is a Level II company with turnover of Rs 120 crore. During the year it bought 40% of the equity of Beta Ltd, an associate, and has no subsidiaries. It prepares only standalone statements. A director believes AS 23 on associates must be applied in its financial statements. Which view is correct?

AS 23 applies only in the preparation of consolidated financial statements, so it does not apply to Ananya's standalone statements even though it holds 40% of an associate. The investment in the associate is accounted for as an investment under AS 13 instead.

  1. AAS 23 applies in the standalone statements because it holds 40%
  2. BAS 23 applies only when consolidated financial statements are prepared, so it does not apply to standalone statementsCorrect
  3. CAS 23 applies because the company is Level II and Level II must apply all standards
  4. DAS 23 applies only if the holding is above 50%

Explanation

AS 23 deals with accounting for associates in consolidated financial statements. Where an entity has no subsidiary and prepares no consolidated statements, the equity method is not applied in the standalone statements, which carry the investment under AS 13. The 50% test is wrong because significant influence is presumed from 20%.

Did you get it right without looking?

One question tells you little. A timed set on Applicability of Accounting Standards shows your real accuracy, how long you take and where you lose marks.

Practise Applicability of Accounting StandardsFree diagnostic mock

More Applicability of Accounting Standards questions