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CA Final · Financial Reporting · Consolidated Financial Statements

Ishan Ltd's subsidiary Zara Ltd reports to 31 December, and Ishan Ltd's group reporting date is 31 March. Using Zara's latest statements, what adjustment does Ind AS 110 require when Zara cannot prepare statements as at 31 March?

Ind AS 110 requires adjustment for the effects of significant transactions or events that occur between the date of the subsidiary's financial statements and the date of the consolidated financial statements. It does not require adjusting every transaction, and the permitted three-month gap does not remove the adjustment.

  1. AAdjust only for dividends declared by Zara after 31 December
  2. BNo adjustment, as the three-month gap is permitted
  3. CAdjust for the effects of significant transactions or events between 31 December and the date of the consolidated financial statementsCorrect
  4. DAdjust all Zara's transactions between 31 December and 31 March, whether significant or not

Explanation

The text requires the parent to use the subsidiary's most recent statements adjusted for the effects of significant transactions or events occurring between the subsidiary's statement date and the consolidated statements date. It is limited to significant items, and it is not limited to dividends. The permitted gap does not remove the need for adjustment.

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