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

Vertex Holdings Ltd measures its investments in subsidiaries in separate financial statements in accordance with Ind AS 109 (fair value through profit or loss) and holds Sub A, classified as held for sale at year end. Carrying amount (fair value) of Sub A before classification is ₹50 crore; fair value less costs to sell is ₹46 crore, and costs to sell are ₹4 crore. Which treatment follows Ind AS 27?

Vertex continues to measure Sub A under Ind AS 109 at fair value of ₹50 crore. Ind AS 27 applies Ind AS 105 only to investments carried at cost; for Ind AS 109 investments, the measurement does not change when classified as held for sale.

  1. AApply Ind AS 105 measurement and write down to lower of ₹50 crore and ₹46 crore, i.e. ₹46 crore
  2. BContinue Ind AS 109 measurement; the measurement is not changed by held for sale classification, so the investment stays at fair value of ₹50 croreCorrect
  3. CTransfer the investment to cost model and carry it at original cost
  4. DMeasure at ₹46 crore and credit ₹4 crore to a held for sale reserve

Explanation

Ind AS 27 says investments at cost follow Ind AS 105 when held for sale, but the measurement of investments accounted for under Ind AS 109 is not changed in such circumstances. So Sub A stays at fair value ₹50 crore, with ₹4 crore costs to sell not deducted. Option A wrongly applies Ind AS 105 measurement.

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