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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Mehta Infra Ltd's subsidiary, Mehta Roads Pvt Ltd, is unlisted with net worth of Rs 60 crore. Mehta Infra is listed and must follow Ind AS. For the financial year, which statement is correct for Mehta Roads?

Mehta Roads must apply Ind AS. Companies that are holding, subsidiary, associate or joint venture companies of an entity required to apply Ind AS are themselves covered, regardless of their own net worth. Its Rs 60 crore net worth therefore does not exempt it.

  1. AIt need not apply Ind AS, since its own net worth is below Rs 250 crore
  2. BIt may choose to apply Ind AS only after listing
  3. CIt must apply Ind AS, because a subsidiary of a company required to apply Ind AS is also coveredCorrect
  4. DIt must apply Ind AS only if its borrowings exceed Rs 500 crore

Explanation

The rules cover holding, subsidiary, associate and joint venture companies of a company that is required to apply Ind AS, irrespective of the subsidiary's own net worth. Mehta Roads is a subsidiary of a listed company that is covered, so it must apply Ind AS. The net worth test is only for companies not covered through such a link.

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