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

Arjun Capital, an investment entity, holds a wholly owned subsidiary, Arjun Advisory Services, which is not an investment entity and whose main purpose and activities are providing services relating to Arjun Capital's investment activities. How does Arjun Capital treat Arjun Advisory?

Arjun Capital must consolidate Arjun Advisory. Ind AS 110 makes an exception to the investment entity exemption for a non-investment-entity subsidiary whose main purpose and activities are providing services related to the investor's investment activities, and Ind AS 103 applies to its acquisition.

  1. AMeasures it at fair value through profit or loss without consolidation
  2. BConsolidates it under Ind AS 110 and applies Ind AS 103 to its acquisitionCorrect
  3. CAccounts for it only under the equity method
  4. DExcludes it from financial statements until it is sold

Explanation

Ind AS 110 provides that if an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services relating to the investment entity's investment activities, it shall consolidate that subsidiary and apply Ind AS 103 to its acquisition. Fair value treatment applies to other subsidiaries.

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