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CA Final · Financial Reporting · Introduction to Indian Accounting Standards

Sundaram Textiles Ltd, an unlisted company with net worth of Rs 180 crore, has no listed debt or equity securities and is not in the process of listing. It is neither a bank, NBFC nor insurance company. It has a listed holding company that applies Ind AS. Under the Companies (Indian Accounting Standards) Rules, which statement about Sundaram Textiles' accounting framework is correct?

Sundaram Textiles must apply Ind AS because applicability extends to subsidiaries, holding companies, joint ventures and associates of a company that applies Ind AS. Its low net worth and unlisted status do not provide an exemption, since the group link independently brings it within the mandatory Ind AS framework.

  1. AIt may follow Accounting Standards because its net worth is below Rs 250 crore
  2. BIt must apply Ind AS because its holding company applies Ind ASCorrect
  3. CIt must apply Ind AS only if it voluntarily chooses to list in future
  4. DIt is exempt from both Ind AS and Accounting Standards as it is unlisted

Explanation

Ind AS applicability extends to holding, subsidiary, joint venture or associate companies of a company that is required to apply Ind AS. Sundaram is a subsidiary of a listed company applying Ind AS, so the Rs 250 crore net worth threshold for unlisted companies does not help it. Option 0 is wrong because the net worth test applies only to companies not already covered through a parent or group link.

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