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

Orchid Pharma Ltd carries its investment in subsidiary Lotus Labs at cost of ₹80 crore in its separate financial statements. The board commits to sell the entire stake, and the criteria for held for sale are met at year end. Lotus Labs' carrying amount is ₹80 crore and fair value less costs to sell is ₹72 crore. How should Orchid account for this in its separate financial statements?

Orchid should classify the investment as held for sale under Ind AS 105 and measure it at ₹72 crore, the lower of carrying amount and fair value less costs to sell, recognising an ₹8 crore loss, because cost-method investments follow Ind AS 105 once held for sale.

  1. AContinue at ₹80 crore because separate statements are exempt from Ind AS 105
  2. BRemeasure to fair value through profit or loss under Ind AS 109 as a policy change
  3. CClassify as held for sale under Ind AS 105 and measure at ₹72 crore, recognising ₹8 crore lossCorrect
  4. DClassify as held for sale and keep at ₹80 crore, disclosing ₹8 crore as contingent loss

Explanation

Investments accounted at cost are accounted for under Ind AS 105 when classified as held for sale. Measurement is lower of carrying amount (80) and fair value less costs to sell (72), i.e. ₹72 crore, so a loss of ₹8 crore is recognised. Option A ignores the requirement.

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