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

Himalaya Ltd sold an item of plant to its subsidiary Vindhya Ltd at a loss. Which statement is consistent with Ind AS 110 on accounting for this intragroup loss in the consolidated financial statements?

The intragroup loss is eliminated in full on consolidation, but it may signal that the asset is impaired. If so, the impairment is recognised in the consolidated financial statements. Ind AS 110 states that intragroup losses may indicate an impairment, so the loss is not simply retained or ignored.

  1. AThe loss is always retained because it is a realised loss of the selling entity
  2. BThe loss is eliminated in full, and it may indicate an impairment that requires recognition in the consolidated financial statementsCorrect
  3. CThe loss is eliminated only to the extent of the non-controlling interest's share
  4. DThe loss is eliminated and the matter is never evaluated for impairment

Explanation

Ind AS 110 requires profits and losses on intragroup transactions recognised in assets to be eliminated in full. It also states that intragroup losses may indicate an impairment requiring recognition in the consolidated statements. The other options either retain the loss or ignore impairment.

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