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CA Final · Financial Reporting · Consolidated Financial Statements

Mehta Holdings Ltd consolidates Nova Pharma Ltd, whose financial statements are drawn up to 28 February; Mehta's date is 31 March. Nova's statements show profit of Rs 90 lakh for the year. On 20 March, Nova sold a plant, a significant transaction, for a loss of Rs 12 lakh not in its statements. Alignment of dates is impracticable. What is the effect in Mehta's consolidation?

Mehta should adjust Nova's results for the Rs 12 lakh loss on the plant sale. Ind AS 110 requires statements used with a differing date to be adjusted for significant transactions or events occurring between the subsidiary's date and the consolidated date.

  1. AAdjust Nova's results for the Rs 12 lakh loss, because significant transactions between the two dates must be reflectedCorrect
  2. BIgnore the loss since it arose after Nova's reporting date
  3. CRecognise the loss only as a disclosure note in the consolidated statements
  4. DExclude Nova's profit of Rs 90 lakh and consolidate only post-February transactions

Explanation

Under the impracticability route, the subsidiary's latest statements are adjusted for the effects of significant transactions or events between its date and the consolidated date. The plant sale on 20 March is such an event, so the Rs 12 lakh loss is reflected. Ignoring it or merely disclosing it does not meet the requirement.

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