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CA Intermediate · Advanced Accounting · AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Ganga Ltd holds 30% of Hari Ltd, an associate. In Ganga Ltd's consolidated financial statements, Hari Ltd's financial statements used for equity accounting are drawn up to 31 December 2024, whereas Ganga Ltd's year ends 31 March 2025. Which of the following is the correct treatment under AS 23?

Ganga Ltd should use Hari Ltd's statements to 31 December 2024 and adjust for significant transactions or events occurring up to 31 March 2025. AS 23 allows a different reporting date, provided the gap is not more than six months and the effects of significant events are adjusted.

  1. AAdjust Hari Ltd's statements for significant transactions between 31 December 2024 and 31 March 2025, if the gap is not more than six monthsCorrect
  2. BIgnore all transactions after 31 December 2024, whatever their size
  3. CExclude Hari Ltd from the consolidated statements because year-ends differ
  4. DAccount for Hari Ltd at cost under AS 13 for that year

Explanation

AS 23 permits using the associate's financial statements of a different date, but the difference between reporting dates should not be more than six months, and adjustments must be made for significant transactions or events in the gap. Ignoring them or excluding the associate is not allowed.

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