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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Kapoor Ltd holds 90% of Lal Ltd. Lal Ltd's net assets at the consolidation date comprise share capital Rs 10,00,000 and total reserves Rs 6,00,000, of which Rs 2,00,000 were pre-acquisition. Under AS 21, which figure is the consolidated reserves contribution from Lal Ltd (the parent's share of post-acquisition reserves)?

The amount is Rs 3,60,000. Post-acquisition reserves of the subsidiary are Rs 6,00,000 less Rs 2,00,000 pre-acquisition, which is Rs 4,00,000. The parent takes 90% of this, Rs 3,60,000, into consolidated reserves, while the pre-acquisition portion goes into the goodwill computation.

  1. ARs 3,60,000Correct
  2. BRs 5,40,000
  3. CRs 1,80,000
  4. DRs 4,00,000

Explanation

Post-acquisition reserves = 6,00,000 - 2,00,000 = 4,00,000. Parent's 90% share = 3,60,000. Rs 4,00,000 ignores the minority; Rs 5,40,000 uses total reserves, wrongly including pre-acquisition reserves; Rs 1,80,000 takes 90% of only the pre-acquisition amount.

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