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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Sagar Foods Ltd, which follows Ind AS, has a subsidiary, Lahar Packaging Pvt Ltd, that is unlisted and has net worth of Rs 40 crore. Sagar Foods is required to prepare Ind AS financial statements. Which statement about Lahar Packaging's Ind AS obligation is correct?

Lahar Packaging must follow Ind AS because the roadmap covers subsidiaries, associates and joint ventures of companies required to follow Ind AS. The group linkage overrides its own small net worth, and being a private company gives no exemption.

  1. ALahar Packaging must follow Ind AS because its holding company follows Ind ASCorrect
  2. BLahar Packaging may follow AS because its net worth is below Rs 250 crore
  3. CLahar Packaging must follow Ind AS only if it has more than 100 shareholders
  4. DLahar Packaging is exempt because it is a private company

Explanation

Ind AS applicability extends to holding, subsidiary, joint venture and associate companies of companies that are required to follow Ind AS. Net worth of the subsidiary is therefore irrelevant. The option relying on the Rs 250 crore threshold ignores the group linkage rule.

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