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CA Final · Financial Reporting · Consolidated Financial Statements

Veda Industries Ltd consolidates its subsidiary Kiran Components Ltd. Kiran's financial statements are prepared as at 31 December, while Veda's reporting date is 31 March. Preparing Kiran's statements as at 31 March is impracticable. Which treatment is consistent with Ind AS 110?

Veda should consolidate Kiran's 31 December statements, adjusted for significant transactions or events occurring up to 31 March. The three-month gap is within the permitted maximum, so consolidation is allowed. Omitting the adjustments for significant events would breach the requirement.

  1. AConsolidate Kiran's 31 December statements adjusted for significant transactions between 31 December and 31 March, since the date gap is not more than three monthsCorrect
  2. BExclude Kiran from consolidation until its reporting date is aligned with that of Veda
  3. CConsolidate Kiran's 31 December statements without any adjustment, because only the gap in dates matters
  4. DConsolidate Kiran using the statements of the previous year-end, since that gap is a full year

Explanation

When aligning dates is impracticable, the parent uses the subsidiary's most recent statements adjusted for significant transactions or events up to the consolidation date. The gap here is 3 months, which does not exceed the three-month limit. Consolidating without adjusting for significant transactions is wrong because the adjustment is required.

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