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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: Anant Ltd, a parent, prepares separate financial statements under Ind AS 27 and holds a 75% investment in Bhima Ltd, a subsidiary, costing ₹20,00,000. It has chosen to carry investments in subsidiaries at cost. Bhima paid a dividend and Anant's share is ₹1,50,000. How should Anant treat the dividend in its separate financial statements?

Anant recognises the ₹1,50,000 dividend in profit or loss when its right to receive it is established. Under Ind AS 27 this applies in separate financial statements; elimination of the dividend occurs only in the consolidated statements.

  1. AReduce the carrying amount of the investment
  2. BRecognise it in profit or loss when its right to receive the dividend is establishedCorrect
  3. CCredit it to other comprehensive income
  4. DEliminate it because it is an intragroup transaction

Explanation

Under Ind AS 27, dividends from subsidiaries, joint ventures and associates in separate statements are recognised in profit or loss when the entity's right to receive them is established. Elimination of intragroup dividends happens only on consolidation, which is not the case here.

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