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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Meridian Steels Ltd, a parent, prepares separate financial statements in addition to consolidated financial statements. Its CFO suggests using the equity method for its investments in subsidiaries in the separate financial statements, as IAS 27 permits. Which statement is correct under Ind AS 27?

The equity method is not permitted in separate financial statements under Ind AS 27. Investments in subsidiaries, joint ventures and associates must be accounted for either at cost or in accordance with Ind AS 109, because the equity method is a manner of consolidation rather than a measurement basis.

  1. AThe equity method is permitted as a third option alongside cost and Ind AS 109
  2. BThe equity method is not permitted; investments must be at cost or in accordance with Ind AS 109Correct
  3. CThe equity method is permitted only for associates, not for subsidiaries
  4. DThe equity method is mandatory where the parent holds more than 75% of the subsidiary

Explanation

Ind AS 27 allows only cost or Ind AS 109 for investments in subsidiaries, joint ventures and associates. The IAS 27 equity method option was deliberately not carved in, because equity method is a manner of consolidation, not a measurement basis. Option A reflects IAS 27, not Ind AS 27.

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