Skip to content

CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Kaveri Foods Pvt Ltd, an unlisted company, has turnover of Rs 120 crore and borrowings of Rs 30 crore, and qualifies on its own as an SMC. It is a wholly owned subsidiary of Anand Industries Ltd, a listed company. Which statement about Kaveri Foods is correct?

Kaveri Foods is a Non-SMC. A company that is a subsidiary of a Non-SMC cannot qualify as an SMC, and the listed parent is a Non-SMC. Its own turnover and borrowings being within the limits do not override this holding-subsidiary condition.

  1. AIt is an SMC, since its own turnover and borrowings are within limits
  2. BIt is an SMC, since it is unlisted and has no outside shareholders
  3. CIt is an SMC only if its holding company obtains ICAI approval
  4. DIt is a Non-SMC, since it is a subsidiary of a Non-SMC (a listed company)Correct

Explanation

One condition for SMC status is that the company is not a holding or subsidiary of a company which is not an SMC. A listed company is a Non-SMC, so its subsidiary cannot be an SMC even if its own turnover and borrowings are within limits. Option one ignores this condition.

Did you get it right without looking?

One question tells you little. A timed set on Applicability of Accounting Standards shows your real accuracy, how long you take and where you lose marks.

Practise Applicability of Accounting StandardsFree diagnostic mock

More Applicability of Accounting Standards questions