Skip to content

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

Ganga Ltd holds 30% of the equity shares of Yamuna Ltd and has no other interest in it. Ganga Ltd prepares consolidated financial statements because it has subsidiaries. Under AS 23, what is the primary condition for treating Yamuna Ltd as an associate?

Yamuna Ltd is an associate if Ganga Ltd has significant influence over it and it is neither a subsidiary nor a joint venture. A 30% holding presumes significant influence, whereas control or more than 50% voting power indicates a subsidiary under AS 21.

  1. AGanga Ltd has significant influence over Yamuna Ltd, which is neither a subsidiary nor a joint venture of Ganga LtdCorrect
  2. BGanga Ltd has control over the composition of the board of Yamuna Ltd
  3. CGanga Ltd has joint control over Yamuna Ltd with another venturer
  4. DGanga Ltd holds more than 50% of the voting power of Yamuna Ltd

Explanation

AS 23 defines an associate as an enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture of the investor. Holding 20% or more of voting power is presumed to give significant influence. Control or joint control would make it a subsidiary or joint venture instead.

Did you get it right without looking?

One question tells you little. A timed set on AS 23 Accounting for Investments in Associates in Consolidated Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise AS 23 Accounting for Investments in Associates in Consolidated Financial StatementsFree diagnostic mock

More AS 23 Accounting for Investments in Associates in Consolidated Financial Statements questions