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CA Final · Financial Reporting · Ind AS 27 Separate Financial Statements

Veda Industries Ltd holds controlling stakes in two subsidiaries and an associate. In preparing its separate financial statements under Ind AS 27, the CFO proposes to apply the equity method to the associate, as permitted under IAS 27. Which statement is correct under Ind AS 27?

Ind AS 27 does not allow the equity method in separate financial statements. Investments in subsidiaries, joint ventures and associates must be measured either at cost or in accordance with Ind AS 109, because the equity method is a manner of consolidation rather than a measurement basis.

  1. AThe equity method is permitted for associates but not for subsidiaries
  2. BThe equity method is not an option in Ind AS 27; the investments must be at cost or in accordance with Ind AS 109Correct
  3. CThe equity method is permitted if applied consistently to all categories of investments
  4. DThe equity method is permitted if the associate is classified as held for sale

Explanation

Ind AS 27 requires investments in subsidiaries, joint ventures and associates to be accounted for either at cost or in accordance with Ind AS 109. The equity method option in IAS 27 was removed in Ind AS 27 because the equity method is a manner of consolidation, not a measurement basis. The first option is wrong because no category may use the equity method.

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