CA Final · Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures
Veda Ltd holds 28% of Kaveri Ltd, an associate, and applies the equity method. Kaveri Ltd values its inventory on a different cost formula from Veda Ltd for like transactions in like circumstances. Kaveri Ltd can easily provide figures on Veda Ltd's formula. Which statement is correct under Ind AS 28 when Veda Ltd prepares its financial statements?
Veda Ltd must adjust Kaveri Ltd's inventory figures to its own cost formula. Ind AS 28 requires uniform accounting policies, and for an associate the requirement is relaxed only where it is impracticable. Since the data is readily available, adjustment is practicable and the difference cannot simply be ignored.
- AAdjustments are never needed for an associate, because Veda Ltd has no control over Kaveri Ltd.
- BVeda Ltd must use uniform accounting policies and adjust Kaveri Ltd's figures, since for an associate the uniformity requirement is waived only where it is impracticable.Correct
- CVeda Ltd must adjust only if the difference exceeds 10% of Kaveri Ltd's profit.
- DVeda Ltd may choose either policy for the associate at its discretion each year.
Explanation
Ind AS 28 requires uniform accounting policies for like transactions, and in the case of an associate this applies unless it is impracticable. This is stricter than IAS 28, which has no such requirement. Here Kaveri Ltd can easily supply the data, so adjustment is practicable. The option that waives adjustment for all associates misreads the standard.
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