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CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Kaveri Investments Ltd qualifies as an investment entity under Ind AS 110. It holds two subsidiaries. Subsidiary X is an operating company that is itself not an investment entity, and it is held purely for investment returns. Subsidiary Y is not an investment entity, and its main purpose and activities are providing services that relate to Kaveri's investment activities. How should Kaveri account for these subsidiaries?

Kaveri measures X at fair value through profit or loss and consolidates Y. An investment entity does not consolidate its subsidiaries, except a non-investment-entity subsidiary whose main purpose and activities are providing services related to the investment entity's investment activities, which must be consolidated.

  1. AConsolidate both X and Y
  2. BMeasure both X and Y at fair value through profit or loss
  3. CMeasure X at fair value through profit or loss and consolidate YCorrect
  4. DConsolidate X and measure Y at fair value through profit or loss

Explanation

Ind AS 110 says an investment entity does not consolidate its subsidiaries and measures them at FVTPL under Ind AS 109. The exception is a subsidiary that is not an investment entity and whose main purpose and activities are providing services relating to the investment entity's investment activities; that subsidiary is consolidated. So X is at FVTPL and Y is consolidated. Option B ignores the services-subsidiary exception.

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