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

Sagar Textiles Ltd, a parent with a subsidiary, an associate and a joint venture, is preparing separate financial statements under Ind AS 27. The CFO suggests using the equity method for the associate, as permitted by IAS 27. Which statement is correct under Ind AS 27 as notified in India?

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, because the equity method is a manner of consolidation and not a measurement basis.

  1. AEquity method is permitted for associates and joint ventures but not for subsidiaries
  2. BEquity method is permitted for all three categories if disclosed
  3. CEquity method is not an option; investments must be at cost or per Ind AS 109Correct
  4. DEquity method is permitted only if the entity also prepares consolidated statements

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. The equity method option in IAS 27 was not carried into Ind AS 27 because it is a manner of consolidation, not a measurement basis. The option that permits it for associates is therefore wrong.

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