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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Ganga Ltd holds 30% of the voting power in Yamuna Ltd and 60% in Sutlej Ltd. Mr Anil owns 25% of Ganga Ltd's voting power, and no other party has an interest in it. Considering the AS 18 definitions of control and significant influence, which of the following is correct?

Sutlej is a subsidiary because Ganga holds more than half of its voting power, and Yamuna is an associate because 30% gives significant influence. Both are therefore related parties of Ganga under AS 18. A 20% holding indicates influence, not control.

  1. AYamuna is a subsidiary of Ganga because holding exceeds 20%
  2. BSutlej is a related party of Ganga as its subsidiary, and Yamuna is a related party as an associate, subject to the significant influence presumptionCorrect
  3. CGanga is a related party of Anil only if Anil is a director
  4. DSutlej is an associate of Ganga because its holding exceeds 50%

Explanation

Ownership of more than one-half of voting power is control, so Sutlej (60%) is a subsidiary. Ownership of 20% or more gives significant influence, so Yamuna (30%) is an associate, a related party. Anil holds 25% of Ganga, so he has significant influence over it, regardless of any directorship. Holding above 20% does not make Yamuna a subsidiary.

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