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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Kaveri Industries Ltd is a listed company applying Ind AS. Its subsidiary, Narmada Components Pvt Ltd, is unlisted with a net worth of Rs 40 crore and has no other triggers for Ind AS. Narmada has no debt or equity listed or in the process of listing. How should Narmada prepare its financial statements?

Narmada must apply Ind AS because it is a subsidiary of a listed company that is mandatorily covered. Applicability extends to holding, subsidiary, joint venture and associate companies of covered entities, so its own low net worth does not exempt it, and it cannot choose a framework annually.

  1. AUnder Accounting Standards, because its own net worth is below Rs 250 crore
  2. BUnder Ind AS, because its holding company is required to apply Ind ASCorrect
  3. CUnder Ind AS only if its board of directors passes a resolution
  4. DUnder either framework at its option each year

Explanation

Ind AS applicability extends to holding, subsidiary, joint venture and associate companies of a company that is required to apply Ind AS. Narmada's small net worth is irrelevant because it is a subsidiary of a covered listed company. Option A ignores this extension. Option D is wrong because the framework cannot be switched yearly.

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