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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Kaveri Industries Ltd. sold goods costing Rs 8,00,000 to its subsidiary, Kaveri Retail Ltd., at Rs 10,00,000 during the year. Kaveri Retail sold none of them by year end. Which statement is correct for Kaveri Industries' standalone financial statements under AS 18?

Kaveri Industries must disclose the parent-subsidiary relationship, the nature of the sale, the transaction volume of Rs 10,00,000 and any outstanding balance. Disclosure uses the transaction value, not cost or profit, and consolidation eliminations do not remove the requirement in standalone statements.

  1. ANo disclosure is needed as the transaction is eliminated on consolidation
  2. BDisclose the nature of the relationship, the volume of transactions Rs 10,00,000 and the outstanding balances, if anyCorrect
  3. CDisclose only the profit element of Rs 2,00,000
  4. DDisclose only the cost of Rs 8,00,000 as the transaction value

Explanation

AS 18 requires disclosure in standalone statements of the related party relationship, a description of the transaction, its volume (the transaction value Rs 10,00,000) and outstanding balances. The profit of Rs 2,00,000 is not the volume, and the cost is irrelevant. Elimination on consolidation does not remove the standalone requirement.

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