Skip to content

CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Meridian Capital Ltd qualifies as an investment entity under Ind AS 110. It holds two subsidiaries. Alpha Ventures Pvt Ltd is an investee company in which it invests for capital appreciation. Beta Advisory Pvt Ltd is not an investment entity and its main purpose and activities are providing investment-related services to Meridian Capital. How should Meridian Capital account for these subsidiaries?

Meridian Capital should measure Alpha at fair value through profit or loss and consolidate Beta. Ind AS 110 exempts investment entities from consolidating subsidiaries, but requires consolidation of a non-investment-entity subsidiary whose main purpose and activities are providing services related to the investment entity's investment activities.

  1. AConsolidate both Alpha and Beta, since control exists over each
  2. BMeasure both Alpha and Beta at fair value through profit or loss
  3. CMeasure Alpha at fair value through profit or loss and consolidate BetaCorrect
  4. DConsolidate Alpha and measure Beta at fair value through profit or loss

Explanation

An investment entity does not consolidate its subsidiaries but measures them at FVTPL under Ind AS 109. The exception is a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services relating to the investment entity's investment activities; that subsidiary is consolidated. Alpha is therefore at FVTPL and Beta is consolidated.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 110 Consolidation Procedure for Subsidiaries shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 110 Consolidation Procedure for SubsidiariesFree diagnostic mock

More Ind AS 110 Consolidation Procedure for Subsidiaries questions