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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Kaveri Power Ltd (Ind AS applicable) is a subsidiary of Narmada Holdings Ltd, which is listed. Kaveri itself is unlisted with net worth of Rs 40 crore. Narmada Holdings has an associate, Godavari Agro Ltd, which is unlisted with net worth Rs 30 crore. Which statement about Ind AS applicability is correct under the Companies (Indian Accounting Standards) Rules?

Both Kaveri and Godavari must apply Ind AS. Narmada Holdings is listed and hence required to follow Ind AS, and the rules extend Ind AS to its subsidiaries and associates regardless of their own net worth being below the Rs 250 crore threshold.

  1. AOnly Kaveri must apply Ind AS; Godavari need not as it is an associate with low net worth
  2. BNeither Kaveri nor Godavari is required to apply Ind AS because both are unlisted with net worth below Rs 250 crore
  3. CBoth Kaveri and Godavari must apply Ind AS because each is a subsidiary or associate of a company required to apply Ind ASCorrect
  4. DOnly Godavari must apply Ind AS because associates are always covered while subsidiaries are not

Explanation

Ind AS applies to holding, subsidiary, joint venture or associate companies of a company required to apply Ind AS, irrespective of their own net worth. Narmada is listed, so it must apply Ind AS; both Kaveri (subsidiary) and Godavari (associate) are therefore covered. Option B ignores the group-linkage trigger.

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