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

Ganga Ltd holds 35% of Brahmaputra Ltd, an associate, and also has subsidiaries. For consolidation, Ganga uses Brahmaputra's financial statements for the year ended 28 February 2026, while Ganga's own year end is 31 March 2026. What is the correct treatment under AS 23?

The practice is permitted with adjustments. AS 23 allows an associate's financial statements drawn up to a different date to be used if the gap is within six months, but the effects of significant transactions or events between the two dates must be adjusted.

  1. ANot permitted; the associate must always prepare statements at 31 March
  2. BPermitted; adjustments are made for significant transactions or events between 28 February and 31 March 2026Correct
  3. CPermitted; no adjustment is allowed for the intervening period
  4. DPermitted; the associate is then excluded from consolidation

Explanation

AS 23 allows use of the associate's statements as of a different date, provided the difference is not more than six months and adjustments are made for the effects of significant transactions or events occurring between the dates. Banning the practice or forbidding adjustments is wrong, and exclusion is not the consequence.

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