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CA Final · Financial Reporting · Consolidated Financial Statements

Kaveri Ltd consolidates a subsidiary using the subsidiary's statements as at 31 December, because preparing statements as at 31 March, the group's reporting date, is impracticable. Last year the gap was three months. This year management proposes to use statements as at 31 January, a two-month gap, to improve timeliness. Evaluate this proposal using the Ind AS 110 text.

The proposal is not appropriate. Although a two-month gap is within the three-month maximum, Ind AS 110 requires the length of the reporting periods and any difference between the dates of the financial statements to be the same from period to period, and moving from three months to two breaks that requirement.

  1. APermitted, because a gap of two months is within the three-month limit, so consistency is not relevant
  2. BNot permitted, because any gap must be exactly three months
  3. CPermitted only if the subsidiary's results are not significant
  4. DNot appropriate, because while the gap is within three months, the standard requires the length of reporting periods and any difference between the dates to be the same from period to periodCorrect

Explanation

Two months is within the three-month cap, but Ind AS 110 also requires that the length of the reporting periods and any difference between the dates be the same from period to period. Changing the gap from three to two months breaks that consistency requirement. The gap need not be exactly three months, and materiality is not the test.

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