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CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Himalaya Ltd sold a machine with a carrying amount of ₹5,00,000 to its subsidiary Nilgiri Ltd for ₹4,20,000, resulting in a loss in Himalaya's books. Which statement follows Ind AS 110 for the consolidated financial statements?

The loss is eliminated in full on consolidation because it arises from an intragroup transaction. However, Ind AS 110 notes that such a loss may indicate an impairment of the asset, which would then need to be recognised in the consolidated financial statements.

  1. AThe loss is retained because it is realised through the sale
  2. BThe loss is eliminated in full, and the intragroup loss may indicate an impairment that requires recognition in the consolidated financial statementsCorrect
  3. CThe loss is eliminated only to the extent of non-controlling interest
  4. DThe loss is shown as other comprehensive income

Explanation

Ind AS 110 requires profits or losses on intragroup transactions recognised in assets to be eliminated in full. It also notes that intragroup losses may indicate an impairment that requires recognition in the consolidated statements. Retaining the loss ignores the elimination requirement.

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