CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries
Veda Capital Ltd is an investment entity under Ind AS 110. It holds 100% of Veda Realty Ltd, which is an operating investee and not an investment entity, and 100% of Veda Advisory Ltd, which is not an investment entity and whose main purpose and activities are providing investment-related services to Veda Capital. How should Veda Capital's financial statements treat these two subsidiaries?
Veda Realty is measured at fair value through profit or loss, because an investment entity does not consolidate its subsidiaries. Veda Advisory is consolidated, because it is not an investment entity and its main purpose and activities are providing services related to the investment entity's investment activities.
- AConsolidate both subsidiaries line by line
- BMeasure both at fair value through profit or loss and consolidate neither
- CMeasure Veda Realty at fair value through profit or loss and consolidate Veda AdvisoryCorrect
- DConsolidate Veda Realty and measure Veda Advisory at fair value through profit or loss
Explanation
An investment entity does not consolidate its subsidiaries and measures them at fair value through profit or loss under Ind AS 109. The exception is a subsidiary that is not itself an investment entity and whose main purpose and activities are services relating to the investment entity's investment activities. Veda Advisory fits this exception and is consolidated, while Veda Realty is measured at FVTPL. The option that applies FVTPL to both ignores the services-subsidiary exception.
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