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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Meera Textiles Ltd. holds 30% of the equity shares of Kaveri Dyes Ltd., which is not a subsidiary. Meera Textiles also buys yarn from Kaveri Dyes during the year. Under AS 18, how should Kaveri Dyes Ltd. be viewed by Meera Textiles Ltd. for related party disclosure?

Kaveri Dyes Ltd. is a related party because it is an associate of Meera Textiles Ltd. A 30% holding gives significant influence, presumed from 20%, and AS 18 treats associates as related parties regardless of the 50% subsidiary test or any transaction size.

  1. ANot a related party, as holding is below 50%
  2. BA related party, being an associateCorrect
  3. CA related party only if transactions exceed 10% of turnover
  4. DA related party only if Meera Textiles controls its board

Explanation

Under AS 18, an associate (as defined in AS 23) is a related party of the investing enterprise. Significant influence is presumed at 20% or more voting power, so 30% makes Kaveri Dyes an associate. The 50% threshold applies to subsidiaries, not associates, and no transaction-value threshold exists for being a related party.

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