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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Tara Engineering Ltd and its subsidiary Tara Castings Ltd are being reported. Tara Engineering sold goods costing ₹30 lakh to Tara Castings for ₹36 lakh and also lent it ₹50 lakh at the year end. Tara Engineering prepares separate financial statements and consolidated financial statements. Which statement is correct as per AS 18?

Disclosure is required in Tara Engineering's separate financial statements because parent and subsidiary are related parties. In the consolidated financial statements, intra-group transactions are eliminated on consolidation, so AS 18 does not require them to be disclosed there.

  1. ANo disclosure is needed in the separate financial statements because the parties are group entities
  2. BDisclosure is needed in Tara Engineering's separate financial statements, and intra-group transactions need not be disclosed in the consolidated financial statements as they are eliminatedCorrect
  3. CDisclosure is needed only in the consolidated financial statements
  4. DDisclosure is required in both sets of statements, including the eliminated intra-group items

Explanation

AS 18 applies to separate financial statements of each enterprise, so the sale and loan between parent and subsidiary are disclosed there. In consolidated statements, intra-group transactions are eliminated and need not be disclosed under AS 18. Options 3 and 4 misstate where disclosure arises.

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