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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Himalaya Ltd and Vindhya Ltd are both subsidiaries of Sahyadri Ltd. Himalaya purchased raw material from Vindhya for ₹5,00,000 during the year. Which statement is correct as per AS 18 in Himalaya's separate financial statements?

Vindhya Ltd is a related party of Himalaya Ltd because both are fellow subsidiaries under common control of Sahyadri Ltd. AS 18 specifically covers fellow subsidiaries, so Himalaya must disclose the ₹5,00,000 purchase in its own financial statements.

  1. AVindhya is a related party as a fellow subsidiary, and the transaction is disclosedCorrect
  2. BVindhya is not a related party because there is no direct holding between them
  3. CVindhya is a related party only if the purchase exceeds 10% of turnover
  4. DDisclosure is needed only in Sahyadri's statements and not in Himalaya's

Explanation

AS 18 lists fellow subsidiaries as related parties, since they are under common control. Hence Himalaya must disclose its dealings with Vindhya. No materiality percentage test exists in AS 18 for this, and the disclosure is required in each reporting enterprise's own statements.

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