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CA Final · Financial Reporting · Consolidated Financial Statements

Arjun Ltd, a parent with a 31 March year end, has a subsidiary whose financial statements are drawn up to 31 December. The subsidiary cannot practicably prepare additional statements as at 31 March. Arjun Ltd uses the subsidiary's 31 December statements, adjusted for significant transactions between 1 January and 31 March. Which statement is correct under Ind AS 110?

The treatment is acceptable. If using the same date is impracticable, the parent uses the subsidiary's latest statements adjusted for significant transactions or events up to the consolidation date. The gap must be no more than three months, and the gap and period lengths must stay the same from period to period.

  1. AThis is acceptable, because the difference between the dates is no more than three months and is kept the same from period to periodCorrect
  2. BThis is not acceptable, because the difference in reporting dates must never exceed one month
  3. CThis is acceptable only if no adjustment is made for events after 31 December
  4. DThis is acceptable, but the subsidiary must change to a 30 June date next year to stay within the limit

Explanation

Where it is impracticable to use the same date, the parent uses the subsidiary's most recent statements adjusted for significant transactions or events up to the consolidation date. The gap here is three months, which is the maximum permitted, and the lengths of periods and the gap must be the same each period. A one-month limit and a ban on adjustments are not in the standard.

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