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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Kiran Ltd, a parent, accounts for its investment in subsidiary Tara Ltd at cost in separate financial statements. Later, Kiran classifies the Tara investment as held for sale under Ind AS 105. In contrast, its investment in associate Neel Ltd is accounted for under Ind AS 109 at fair value through profit or loss, and Neel is also being classified as held for sale. Which statement is correct?

Tara, carried at cost, is accounted for under Ind AS 105 once classified as held for sale. Neel, measured under Ind AS 109, keeps its Ind AS 109 measurement unchanged, because Ind AS 27 states that such measurement does not change when held-for-sale classification applies.

  1. ABoth investments are remeasured under Ind AS 105 at the lower of carrying amount and fair value less costs to sell
  2. BNeither investment is affected by Ind AS 105
  3. CTara is accounted for under Ind AS 105, while the measurement of Neel under Ind AS 109 is not changedCorrect
  4. DNeel is accounted for under Ind AS 105, while Tara continues at cost

Explanation

Ind AS 27 says investments at cost are accounted for under Ind AS 105 when held for sale, whereas the measurement of investments accounted for under Ind AS 109 is not changed in those circumstances. So Tara follows Ind AS 105 and Neel remains at fair value through profit or loss. Option A wrongly applies Ind AS 105 measurement to the Ind AS 109 investment.

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