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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Rohan Ltd is an unlisted company with turnover of Rs 200 crore and borrowings of Rs 40 crore. It is a subsidiary of Sagar Industries Ltd, whose equity shares are listed on the BSE. Rohan has a Rs 60 crore bank loan only in the books of a fellow subsidiary, not in its own. For Rohan's own financial statements, which is correct?

Rohan Ltd is a Level I entity because it is a subsidiary of a listed company, Sagar Industries Ltd. The Level I classification covers holding and subsidiary companies of listed entities irrespective of their own turnover or borrowings.

  1. ALevel II, since its own turnover and borrowings are below the thresholds
  2. BLevel I, since it is a subsidiary of a listed entityCorrect
  3. CLevel III, since it is not itself listed
  4. DLevel II, since the holding company's listing affects only consolidated statements

Explanation

Level I includes holding and subsidiary companies of entities that are listed or in the process of listing, regardless of their own size. Rohan is a subsidiary of listed Sagar Industries, so it is Level I. Its own turnover of Rs 200 crore and borrowings of Rs 40 crore would otherwise indicate Level II, which is why option A is tempting but wrong. The fellow subsidiary's loan is irrelevant.

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