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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Vihaan Ltd is an unlisted company with turnover of Rs 240 crore and borrowings of Rs 45 crore. It is the wholly owned subsidiary of Arjun Industries Ltd, which is listed. Vihaan Ltd has no subsidiary. Under the applicability criteria, which statement is correct?

Vihaan Ltd is a Level I company. Although its own turnover and borrowings are below the thresholds, its holding company Arjun Industries is listed and hence Level I, and a company with a Level I holding or subsidiary company is itself Level I.

  1. AVihaan Ltd is Level II because its own turnover and borrowings are below the limits
  2. BVihaan Ltd is Level I because its holding company is a Level I companyCorrect
  3. CVihaan Ltd is Level III because it is wholly owned
  4. DVihaan Ltd is exempt from all Accounting Standards

Explanation

A company is Level I if its holding company or subsidiary is Level I. Arjun Industries is listed and therefore Level I, so Vihaan Ltd is Level I even though its own turnover (Rs 240 crore) and borrowings (Rs 45 crore) are below the limits. Option 0 ignores the holding company test.

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