Skip to content

CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Sagar Ltd. holds 60% of Tarang Ltd. and 25% of Uday Ltd. Tarang holds 15% of Vihar Ltd. and Uday holds 40% of Vihar Ltd. Vihar and Tarang transact with each other. Considering AS 18 (related parties include subsidiaries, fellow subsidiaries, associates and enterprises under significant influence by KMP), which of the following is correct for Sagar's relationship with the entities, and what matters for Sagar's own disclosures?

Tarang is Sagar's subsidiary and Uday is its associate, so both are related parties. Vihar cannot be treated as a subsidiary by adding 15% and 40%, because Uday is only an associate and does not give Sagar control. Transactions between Tarang and Vihar are not Sagar's own disclosures.

  1. ATarang is a subsidiary and Uday an associate; both are related parties of Sagar, and Vihar is not related to Sagar through Sagar's direct holdingCorrect
  2. BOnly Tarang is related; Uday is not since holding is below 50%
  3. CVihar is a subsidiary of Sagar because of indirect holding of 55%
  4. DAll three are subsidiaries of Sagar

Explanation

Tarang (60%) is a subsidiary; Uday (25%) is an associate as holding is 20% or more. Both are related parties. Vihar is held only 15% by Tarang and 40% by Uday; Sagar does not control Vihar by simply adding these (Uday is not a subsidiary), so the 55% sum is incorrect. Transactions between Tarang and Vihar are not Sagar's own transactions.

Did you get it right without looking?

One question tells you little. A timed set on AS 18 Related Party Disclosures shows your real accuracy, how long you take and where you lose marks.

Practise AS 18 Related Party DisclosuresFree diagnostic mock

More AS 18 Related Party Disclosures questions