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

Ishaan Ltd, the parent, sells inventory to its subsidiary Jaya Ltd at a loss. The inventory is still held by Jaya at year end. Which statement best reflects the Ind AS 110 consolidation requirement?

Intragroup losses on transfers still held in assets are eliminated in full, and the loss may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 110 does not limit elimination to profits, nor does it ignore the possible impairment signal.

  1. AIntragroup losses are retained as they were realised in cash
  2. BIntragroup losses are eliminated, and the loss may indicate an impairment that requires recognition in the consolidated financial statementsCorrect
  3. COnly intragroup profits are eliminated, never losses
  4. DIntragroup losses are eliminated and no impairment consideration arises

Explanation

Para B86(c) requires intragroup profits or losses recognised in assets to be eliminated in full. It also states that intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Hence only option B reflects both parts.

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