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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Pragati Infra Ltd's financial statements show total assets of Rs 400 crore and a net worth of Rs 120 crore on 31 March. Its parent, Pragati Holdings Ltd, is listed and prepares Ind AS financial statements. Pragati Infra's own shares are unlisted and it has no plans to list. Which statement is correct?

Pragati Infra must apply Ind AS because it is a subsidiary of a listed company that follows Ind AS. The rules extend Ind AS to holding, subsidiary, joint venture and associate companies of covered entities, so its own net worth and listing status do not matter.

  1. APragati Infra need not apply Ind AS because its net worth is below Rs 250 crore
  2. BPragati Infra must apply Ind AS because its holding company is required to apply Ind ASCorrect
  3. CPragati Infra may choose Ind AS only if its auditor recommends it
  4. DPragati Infra must apply Ind AS only if total assets exceed Rs 500 crore

Explanation

Ind AS applicability extends to holding, subsidiary, joint venture and associate companies of a company covered by the mandatory criteria. Pragati Infra is a subsidiary of a listed Ind AS company, so the net worth test is irrelevant. The first option wrongly applies the net worth test alone.

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