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CA Final · Financial Reporting · Consolidated Financial Statements

Kaveri Ltd., an Indian parent, has a subsidiary whose financial statements are drawn up to 31 December, while the parent reports at 31 March. It is impracticable for the subsidiary to prepare additional statements at 31 March. Under Ind AS 110, what should Kaveri Ltd. do?

Kaveri Ltd. should consolidate using the subsidiary's latest financial statements, adjusted for significant transactions or events between 31 December and 31 March. The three-month gap is within the maximum allowed, and the gap and period lengths must stay consistent from period to period.

  1. AExclude the subsidiary from consolidation until reporting dates are aligned
  2. BConsolidate using the subsidiary's most recent financial statements adjusted for significant transactions or events between the two dates, since the gap is not more than three monthsCorrect
  3. CConsolidate the subsidiary's unadjusted statements because adjustments are never required when it is impracticable to align dates
  4. DConsolidate only if the gap is under one month; otherwise use fair value

Explanation

Where aligning is impracticable, the parent uses the subsidiary's most recent statements adjusted for significant transactions or events in the gap. The difference must be no more than three months, and here it is exactly three months (31 Dec to 31 Mar), so it is permitted. Using unadjusted statements ignores the required adjustments.

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