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CA Final · Financial Reporting · Consolidated Financial Statements

Sagar Ltd. has subsidiaries A and B. A's statements are at 31 January and B's at 31 March; the group reports at 31 March. For A, preparing 31 March statements is impracticable. During February, A sold a major plant for a large loss. Which treatment complies with Ind AS 110?

Sagar Ltd. should consolidate A's 31 January statements after adjusting for the significant February plant sale and its loss. The two-month gap is within the three-month limit and should remain the same in later periods. Ignoring the sale would breach the adjustment requirement.

  1. AConsolidate A's 31 January statements without adjustment because the gap is only two months
  2. BConsolidate A's 31 January statements adjusted for the effect of the February plant sale, and keep the two-month gap in future periodsCorrect
  3. CExclude A from consolidation because its date differs
  4. DConsolidate A's statements and reverse the loss because it arose after A's reporting date

Explanation

With impracticability, the most recent statements are used, adjusted for significant transactions or events between their date and the consolidated date. The February plant sale is significant, so it must be adjusted. The two-month gap is within three months and must be kept consistent each period. The unadjusted option omits the required adjustment.

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