Skip to content

CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Arvind Ltd. (a company) and Bharat Ltd. are both subsidiaries of Chola Holdings Ltd. During the year Arvind Ltd. sold goods worth ₹18,00,000 to Bharat Ltd. and lent ₹10,00,000 to Chola Holdings Ltd. at 9% interest, the interest for the full year being payable. In Arvind Ltd.'s financial statements, which is correct?

Both are related party transactions. Fellow subsidiaries and the holding company are related parties under AS 18, so the ₹18,00,000 sale and the ₹10,00,000 loan with ₹90,000 interest must be disclosed. No fellow-subsidiary exemption applies.

  1. AOnly the loan to Chola Holdings is a related party transaction
  2. BOnly the sale to Bharat Ltd. is a related party transaction
  3. CBoth are related party transactions: Bharat Ltd. is a fellow subsidiary and Chola Holdings is the holding company; the interest of ₹90,000 is also disclosed as part of the transactionCorrect
  4. DNeither is a related party transaction because disclosure of fellow subsidiaries is exempt

Explanation

AS 18 treats holding company, subsidiaries and fellow subsidiaries as related parties. The sale of ₹18,00,000 to Bharat and the loan of ₹10,00,000 to Chola are both reportable. Interest is 10,00,000 × 9% = ₹90,000. No exemption exists for fellow subsidiaries in the company's own statements.

Did you get it right without looking?

One question tells you little. A timed set on AS 18 Related Party Disclosures shows your real accuracy, how long you take and where you lose marks.

Practise AS 18 Related Party DisclosuresFree diagnostic mock

More AS 18 Related Party Disclosures questions