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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Ganga Pharma Ltd is a subsidiary of Himalaya Holdings Ltd. During the year, Ganga lent Rs 50 lakh to Himalaya at 9% interest. Ganga also sold goods of Rs 20 lakh to Himalaya and Rs 10 lakh to Yamuna Ltd, another subsidiary of Himalaya. In Ganga's financial statements, which related party transactions should be disclosed under AS 18?

Ganga must disclose the loan to Himalaya, the sale to Himalaya and the sale to Yamuna. AS 18 treats the holding company and fellow subsidiaries, being under common control, as related parties, so a lack of direct shareholding between Ganga and Yamuna does not remove disclosure.

  1. AOnly the loan to Himalaya
  2. BOnly the loan and the sale to Himalaya, since Yamuna is not a party to Ganga
  3. CThe loan and sales to Himalaya only, as Ganga and Yamuna have no direct holding
  4. DThe loan to Himalaya, the sale to Himalaya, and the sale to Yamuna as a fellow subsidiaryCorrect

Explanation

Parties under common control are related parties: a holding company and fellow subsidiaries are related to Ganga. Therefore the loan (Rs 50 lakh), sale to Himalaya (Rs 20 lakh) and sale to Yamuna (Rs 10 lakh) are all disclosed. Absence of direct holding between Ganga and Yamuna is irrelevant.

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