Skip to content

CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Kavya Ltd holds 75% of the equity shares of Tanish Ltd. At the date of acquisition Tanish's equity share capital was ₹4,00,000 and its reserves were ₹1,00,000. At the consolidated balance sheet date its reserves are ₹2,60,000, and the share capital is unchanged. What is the minority interest to be shown in the consolidated balance sheet?

Minority interest is ₹1,65,000. It equals 25% of Tanish Ltd's net worth at the balance sheet date, that is 25% of share capital ₹4,00,000 plus total reserves ₹2,60,000, which is ₹6,60,000. Both pre- and post-acquisition reserves are included in the minority's share.

  1. A₹65,000
  2. B₹1,65,000Correct
  3. C₹1,25,000
  4. D₹1,00,000

Explanation

Minority interest is the minority's share in the net assets at the balance sheet date, covering share capital and all reserves (pre- and post-acquisition). Net worth = 4,00,000 + 2,60,000 = 6,60,000, and 25% of it = 1,65,000. Taking only 25% of reserves gives 65,000 and ignores the minority's share capital. Using reserves at acquisition gives 1,25,000 and ignores post-acquisition profit.

Did you get it right without looking?

One question tells you little. A timed set on AS 21 Consolidated Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise AS 21 Consolidated Financial StatementsFree diagnostic mock

More AS 21 Consolidated Financial Statements questions