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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Kaveri Industries Ltd is a subsidiary of Godavari Ltd, which also has another subsidiary, Narmada Ltd. In Kaveri's financial statements, which of the following disclosures is required by AS 18 where there were transactions between Kaveri and Narmada?

Kaveri must disclose the name of Narmada, the relationship, nature and volume of transactions and outstanding balances, and also the parent relationship regardless of transactions. Consolidation by Godavari does not exempt Kaveri's separate financial statements from AS 18 disclosures.

  1. AOnly the name of the ultimate parent, with no transaction details
  2. BName of the related party and relationship, nature and volume of transactions, and balances outstanding, plus the parent's name irrespective of transactionsCorrect
  3. COnly the amount of balances outstanding, without the nature of transactions
  4. DNo disclosure, since both companies are consolidated in Godavari's accounts

Explanation

AS 18 requires, where transactions exist, disclosure of the name of the related party, the relationship, nature and volume of transactions, and outstanding balances. Where control exists, the relationship with the parent is disclosed even without transactions. Consolidation in the parent's accounts does not remove the requirement for Kaveri's own statements.

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