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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Meru Ltd is a subsidiary of Himal Ltd. During 2025-26, Meru sold goods of Rs 80 lakh to Himal, and Himal sold goods of Rs 50 lakh to Meru. Meru also gave Himal a loan of Rs 20 lakh, outstanding at year end. Meru's total sales were Rs 5 crore. In Meru's separate financial statements under AS 18, which disclosure is correct?

Meru should disclose sales of Rs 80 lakh, purchases of Rs 50 lakh and the Rs 20 lakh loan balance separately, with the relationship. AS 18 requires volume by type and outstanding balances without netting, and elimination arises only in consolidation.

  1. ADisclose only net sales of Rs 30 lakh because AS 18 requires netting
  2. BDisclose sales of Rs 80 lakh, purchases of Rs 50 lakh and the Rs 20 lakh loan balance separately, with the nature of the relationshipCorrect
  3. CDisclose only transactions above 10% of total sales, so only the Rs 80 lakh sales
  4. DDisclose nothing, since transactions between holding and subsidiary are eliminated in separate statements

Explanation

AS 18 requires disclosure of the volume of each type of transaction and outstanding balances, along with the relationship. Items of a similar nature may be aggregated but different types are not netted; sales, purchases and loans are different types. Elimination applies only in consolidated statements, and AS 18 sets no 10% threshold.

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