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

Rohan Textiles Ltd, a parent, prepares separate financial statements under Ind AS 27. The CFO suggests carrying its investment in an associate, Sundar Dyes Ltd, using the equity method in those separate statements, because IAS 27 permits this. Which statement is correct under Ind AS 27?

Ind AS 27 does not permit the equity method in separate financial statements. Investments in subsidiaries, joint ventures and associates must be accounted for either at cost or in accordance with Ind AS 109, since the equity method is a manner of consolidation, not a measurement basis.

  1. AThe equity method is permitted as a third option alongside cost and Ind AS 109
  2. BThe equity method is not permitted; the investment must be at cost or in accordance with Ind AS 109Correct
  3. CThe equity method is mandatory for associates but not for subsidiaries
  4. DThe equity method is allowed only if the associate is listed

Explanation

Ind AS 27 requires investments in subsidiaries, joint ventures and associates to be accounted for either at cost or in accordance with Ind AS 109. Unlike IAS 27, the equity method option is not given, because it is a manner of consolidation and not a measurement basis. The option of equity method is therefore wrong.

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