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

Arjun Capital Ltd qualifies as an investment entity. It holds a controlling stake in Zenith Realty Ltd, an investee that is not an investment entity and whose main purpose and activities are to provide advisory services relating to Arjun Capital's investment activities. How should Arjun Capital account for its investment in Zenith Realty under Ind AS 110?

Arjun Capital must consolidate Zenith Realty and apply Ind AS 103 to its acquisition. Although investment entities normally measure subsidiaries at fair value through profit or loss, a non-investment-entity subsidiary whose main purpose is providing services related to the investment activities is consolidated.

  1. AMeasure it at fair value through profit or loss, since an investment entity does not consolidate any subsidiary
  2. BConsolidate Zenith Realty and apply Ind AS 103 to its acquisitionCorrect
  3. CAccount for it using the equity method as an associate
  4. DMeasure it at cost less impairment in separate statements only and exclude it from all reporting

Explanation

Ind AS 110 generally requires an investment entity to measure subsidiaries at fair value through profit or loss. The exception is 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. Such a subsidiary must be consolidated and Ind AS 103 applied on acquisition. The fair value option is therefore wrong here.

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