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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Kaveri Industries Ltd holds investments in three subsidiaries, A Ltd, B Ltd and C Ltd, and two associates, D Ltd and E Ltd. In its separate financial statements it records subsidiaries A and B at cost. It proposes to record C Ltd under Ind AS 109 at fair value and the associates at cost. Which statement is correct?

The proposal is not permitted. Ind AS 27 requires the entity to apply the same accounting for each category of investments, so all subsidiaries must be at cost or all under Ind AS 109. Different categories, such as associates, may use a different basis.

  1. APermitted, as the choice can be made investment by investment
  2. BPermitted, provided C Ltd is the largest subsidiary
  3. CNot permitted, because the same accounting must be applied for each category of investments, so all subsidiaries must use the same basisCorrect
  4. DNot permitted, because associates must always be at fair value if any subsidiary is at fair value

Explanation

Ind AS 27 requires the same accounting for each category of investments. Within the subsidiaries category, A and B at cost and C at Ind AS 109 is inconsistent. Using cost for associates and a different basis for subsidiaries would be fine across categories, but the mixing within subsidiaries is not.

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