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

Orion Ltd accounts for its investment in associate Pavan Ltd in its separate financial statements in accordance with Ind AS 109 at fair value. Management commits to sell the investment and Ind AS 105 held for sale criteria are met. Which statement is correct under Ind AS 27?

Where the investment is already accounted for under Ind AS 109, held for sale classification does not change its measurement. Ind AS 27 applies the Ind AS 105 treatment only to investments carried at cost, so Orion continues with Ind AS 109 fair value measurement.

  1. AThe investment is remeasured at the lower of carrying amount and fair value less costs to sell under Ind AS 105
  2. BThe investment is carried at cost less impairment from that date
  3. CThe measurement under Ind AS 109 is not changed by the held for sale classificationCorrect
  4. DThe investment is switched to the equity method until sale

Explanation

Ind AS 27 says investments at cost are accounted for under Ind AS 105 when held for sale, but the measurement of investments accounted for in accordance with Ind AS 109 is not changed in such circumstances. So Orion continues to apply Ind AS 109. The first option wrongly applies the Ind AS 105 measurement rule that is meant for investments held at cost.

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