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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Under AS 21, a subsidiary is excluded from consolidation only when:

AS 21 permits exclusion of a subsidiary only if control is temporary, with shares held exclusively for disposal in the near future, or if severe long-term restrictions impair transfer of funds to the parent. Dissimilar business, losses or foreign location do not justify exclusion.

  1. AIts business activities are dissimilar to those of the parent
  2. BIt is a loss-making company
  3. CControl is intended to be temporary because shares are held exclusively for disposal in the near futureCorrect
  4. DIt is located in a foreign country

Explanation

AS 21 excludes a subsidiary where control is intended to be temporary (acquired and held exclusively with a view to subsequent disposal in the near future) or where it operates under severe long-term restrictions impairing fund transfer. Dissimilar activities, losses or foreign location are not grounds for exclusion.

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