Skip to content

CA Intermediate · Advanced Accounting · AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Meera Textiles Ltd holds 22% of the equity voting power of Kaveri Dyes Ltd and has no other interest in it. Meera Textiles prepares consolidated financial statements because it has subsidiaries. Under AS 23, which statement best describes how Kaveri Dyes should be treated in these consolidated statements, assuming no evidence to the contrary exists?

Kaveri Dyes is an associate and is accounted for by the equity method. AS 23 presumes significant influence where the investor holds 20% or more of voting power, and nothing here rebuts that presumption. Line-by-line consolidation requires control, which a 22% holding does not provide.

  1. AAs an associate, accounted for by the equity methodCorrect
  2. BAs a subsidiary, consolidated line by line
  3. CAs an investment accounted for at cost only
  4. DAs a joint venture, proportionately consolidated

Explanation

AS 23 presumes significant influence when an investor holds 20% or more of the voting power, unless it is clearly shown otherwise. At 22%, Kaveri Dyes is presumed an associate. The equity method applies in consolidated statements. Line-by-line consolidation needs control, which 22% does not give.

Did you get it right without looking?

One question tells you little. A timed set on AS 23 Accounting for Investments in Associates in Consolidated Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise AS 23 Accounting for Investments in Associates in Consolidated Financial StatementsFree diagnostic mock

More AS 23 Accounting for Investments in Associates in Consolidated Financial Statements questions