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CA Final · Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Vindhya Ltd holds 75% of Satpura Ltd, with the balance held by outsiders. Satpura sold goods costing Rs 4,00,000 to Vindhya for Rs 5,00,000. Vindhya sold 60% of these goods outside the group and holds the rest. Tax rate is 25% and deferred tax is recognised on the elimination as required by Ind AS 12. What is the deferred tax asset arising on consolidation from this elimination, and what is the unrealised profit eliminated?

Unrealised profit eliminated is Rs 40,000 and the deferred tax asset is Rs 10,000. Total profit is Rs 1,00,000, of which 40% remains in unsold inventory; elimination is in full, and 25% tax on Rs 40,000 gives the deferred tax asset under Ind AS 12.

  1. ADeferred tax asset Rs 25,000; unrealised profit Rs 1,00,000
  2. BDeferred tax asset Rs 10,000; unrealised profit Rs 40,000Correct
  3. CDeferred tax asset Rs 7,500; unrealised profit Rs 30,000
  4. DDeferred tax asset Rs 15,000; unrealised profit Rs 60,000

Explanation

Total profit = 5,00,000 - 4,00,000 = Rs 1,00,000. Unsold portion = 40%, so unrealised profit = Rs 40,000, eliminated in full. Ind AS 110 applies Ind AS 12 to temporary differences from such eliminations, so DTA = 25% x 40,000 = Rs 10,000. Rs 30,000 applies 75% ownership wrongly. Rs 60,000 uses the sold portion instead of the unsold portion.

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