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CA Final · Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures

Himalaya Textiles Ltd holds 30% of Kaveri Dyes Ltd, an associate. Himalaya follows the cost model for PPE, while Kaveri follows the revaluation model for similar assets. It is impracticable for Kaveri to prepare additional financial statements on Himalaya's policies. Under Ind AS 28 as notified in India, what is the treatment when applying the equity method?

Under Ind AS 28 the investor must use uniform accounting policies, but for an associate this is not required where it is impracticable. Since Kaveri cannot reasonably prepare additional statements, Himalaya may use the associate's policies. This relief is an Indian carve-out from IAS 28.

  1. AHimalaya need not use uniform accounting policies, because it is impracticable in the case of an associateCorrect
  2. BHimalaya must always adjust Kaveri's financial statements to its own policies, with no exception
  3. CHimalaya must stop applying the equity method and measure the associate at fair value
  4. DHimalaya must recognise Kaveri's revaluation surplus directly in its own profit or loss

Explanation

Paragraph 35 of Ind AS 28 requires uniform accounting policies, unless in the case of an associate it is impracticable. This exception is not available in IAS 28. Option B is wrong because it ignores the impracticability exception that Ind AS 28 provides for associates.

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