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CS Executive · Corporate Accounting and Financial Management · Consolidation of Accounts

Parent Ltd loses control of its subsidiary Sub Ltd but retains an investment in it. Under Ind AS 110, at what amount does Parent Ltd recognise the retained investment when control is lost?

The retained investment is recognised at its fair value on the date control is lost. Ind AS 110 treats that fair value as the initial fair value of a financial asset under Ind AS 109 or the cost of an investment in an associate or joint venture.

  1. AIts original cost of acquisition
  2. BIts carrying amount in the consolidated balance sheet just before loss of control
  3. CIts fair value when control is lostCorrect
  4. DIts proportionate share of the net assets of Sub Ltd

Explanation

Ind AS 110 requires the parent to derecognise the former subsidiary's assets and liabilities and recognise any retained investment at its fair value when control is lost. That fair value is treated as the initial recognition fair value of a financial asset under Ind AS 109 or as the cost of an associate or joint venture. Cost or carrying amount is wrong.

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