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

Case: Ganga Ltd. prepares separate financial statements under Ind AS 27 and holds equity shares in its subsidiary Yamuna Ltd., acquired for Rs 200 lakh. During the year Yamuna declared a dividend and Ganga's share was Rs 15 lakh. Ganga has chosen to account for its investments in subsidiaries at cost in its separate financial statements. How should the dividend be recognised in the separate financial statements?

The Rs 15 lakh dividend is recognised as income in profit or loss when Ganga's right to receive it is established. Ind AS 27 prescribes this for dividends from subsidiaries in separate financial statements; elimination occurs only in the consolidated statements.

AAs a reduction of the carrying amount of the investment
BAs other comprehensive income
CAs income in profit or loss when Ganga's right to receive it is establishedCorrect
DEliminated fully against reserves

Explanation

Ind AS 27 requires dividends from subsidiaries, joint ventures and associates in separate financial statements to be recognised in profit or loss when the entity's right to receive the dividend is established. Reducing the investment is a consolidation-style or return-of-capital treatment and not required here. Elimination of the dividend happens only on consolidation.

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