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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Tara Ltd holds 70% of Uday Ltd. When the minority's interest in Uday Ltd was measured, the minority's share of equity was ₹3,00,000. Uday Ltd then incurred a loss of ₹14,00,000 for the year, and the minority has no binding obligation to make good the excess. The total loss borne by the majority interest (Tara Ltd's share) in the consolidated financial statements is:

The majority interest bears ₹11,00,000. Its own 70% share of the loss is ₹9,80,000, and the minority's excess loss of ₹1,20,000 over its ₹3,00,000 interest is also charged to the majority because the minority has no binding obligation. The minority interest becomes nil.

  1. A₹9,80,000
  2. B₹11,00,000Correct
  3. C₹14,00,000
  4. D₹1,20,000

Explanation

The minority's share of the loss is 30% × ₹14,00,000 = ₹4,20,000. This exceeds the minority's interest of ₹3,00,000 by ₹1,20,000. Under AS 21, the excess is adjusted against the majority interest, since the minority has no binding obligation. Majority's loss = ₹9,80,000 + ₹1,20,000 = ₹11,00,000, and the minority interest is reduced to nil.

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