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CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Ananya Ltd consolidates Bharat Ltd. Ananya sold goods to Bharat at a profit, and Bharat still holds them. Under Ind AS 110, how are temporary differences arising from the elimination of this unrealised profit treated?

Temporary differences arising from eliminating unrealised intragroup profits or losses are accounted for under Ind AS 12 Income Taxes. Ind AS 110 expressly says Ind AS 12 applies to them, so deferred tax is recognised on the elimination adjustment rather than ignored or adjusted against goodwill.

  1. AThey are ignored because consolidation adjustments are not tax events
  2. BThey are dealt with under Ind AS 12 Income TaxesCorrect
  3. CThey are adjusted against goodwill under Ind AS 103
  4. DThey are charged to non-controlling interest only

Explanation

Ind AS 110 states that Ind AS 12, Income Taxes, applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Hence deferred tax is recognised on the consolidation adjustment as per Ind AS 12. Goodwill adjustment and NCI-only treatment are not provided in the standard.

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