CS Executive · Corporate Accounting and Financial Management · Consolidation of Accounts
Which statement about the relationship between 'parent' and 'subsidiary' in AS 21 is correct?
In AS 21, a subsidiary is an enterprise that is controlled by another enterprise, which is known as the parent. The relationship rests on control, so merely holding some shares or having an associate does not make an enterprise a parent.
- AA subsidiary is an enterprise controlled by another enterprise, known as the parentCorrect
- BA parent is any enterprise that has an associate
- CA subsidiary is an enterprise that exercises significant influence over another enterprise
- DA parent is an enterprise that holds shares in any other enterprise
Explanation
AS 21 para 5.2 describes a subsidiary as an enterprise controlled by another enterprise, known as the parent. Holding any shares or having an associate does not make an enterprise a parent, since control is the criterion.
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