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

Rohan Ltd loses control of its subsidiary Sagar Ltd but retains a 20% holding. Under Ind AS 110, how is the retained investment initially recognised?

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 or, where appropriate, the cost of an associate or joint venture investment.

  1. AAt its original acquisition cost
  2. BAt its carrying amount in the consolidated balance sheet just before loss of control
  3. CAt its fair value when control is lostCorrect
  4. DAt its proportionate share of net assets of Sagar Ltd

Explanation

Paragraph 25(b) requires the parent to recognise any retained investment in the former subsidiary at fair value when control is lost. That fair value is treated as fair value on initial recognition of a financial asset under Ind AS 109 or, where appropriate, the cost of an associate or joint venture. Original cost or carrying amount would be wrong.

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