14.

140 FINANCIAL REPORTING

UNIT 8 :
DISCLOSURES

8.1 IN SEPARATE FINANCIAL STATEMENTS

i. Disclosures will be as per all applicable Ind AS
ii. When parent elects not to prepare consolidated financial statements and prepares separate
financial statements:
a. Fact that financial statement is a separate financial statement
b. Exemption from consolidation used: entity have to disclose about exemption from
consolidation
c. Name & place of business (country of incorporation, if different) of entity those CFS is
produced for public use & where those CFS are obtainable: If entity produce any CFS
to pubic use those CFS are prepare as per Ind AS
d. List of significant investment in subsidiaries, JV & associates containing details
regarding investee
i. Name
ii. Principal place of business (country of incorporation, if different)
iii. Proportion of ownership interest held
e. Method used for accounting
iii. Parent (i.e. an investment entity) prepare separate financial statement as its only financial
statement:
a. Fact that financial statement is its only financial statement
b. Disclosures as per Ind AS 112
iv. Entity other than above:
a. Fact that financial statement is a separate financial statement
b. List of significant investment in subsidiaries, JV & associates containing details
regarding investee
i. Name
ii. Principal place of business (country of incorporation, if different)
iii. Proportion of ownership interest held
c. Method used for accounting

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 CONSOLIDATED FINANCIAL STATEMENTS 14.141

8.2 IN CONSOLIDATED FINANCIAL STATEMENT

i. The significant judgments and assumptions entity has made in determining:
a. Nature of its interest in another entity or arrangement;
b. Type of joint arrangement in which it has an invested;
c. That it meets the definition of an investment entity
ii. Information about its interests in:
a. subsidiaries
b. arrangements and associates
c. structured entities that are not controlled by the entity
iii. Investment entity status:
a. Change of status
b. Reason
c. Effect of change on financial statement:
i. Total fair value of subsidiaries ceases to be consolidated
ii. Total gain or loss
iii. Line item in Profit or loss
iv. Interest in subsidiaries:
a. Information that enable users to understand:
i. Composition of group
ii. Interest that non controlling Interests have in group activities & cash flows that
are material including:
1. Name of subsidiary
2. Principal place of business (country of Incorporation if different)
3. Proportion of ownership Interest (voting rights proportion, if different)
4. Profit & Loss allocated
5. Accumulated Non controlling interest
6. Summarized financial information about the subsidiary
b. Information to enable user to evaluate:
i. Nature and extent of significant restrictions on its ability to access or use assets,
and settle liabilities, of the group including:
1. To transfer cash or other assets

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 14.142 FINANCIAL REPORTING

2. guarantees or other requirements or loans and advances being made or

repaid
3. the nature and extent to which protective rights of non-controlling interests
can significantly restrict the entity right
4. Carrying amount of assets & liabilities in CFS on which restriction applies
ii. Nature of and changes in, the risks associated with its interests in consolidated
structured entities including:
1. Terms of contractual arrangement-that require to provide financial support
2. Events & circumstances that could expose to risk
3. Provided any financial support:
a. Type & amount of support
b. Reason of support
4. Provided any support to previously unconsolidated structured entity, result in
controlling:
a. Reason of support
5. Intention of support or assist
iii. the consequences of changes in its ownership interest (no loss of control):
1. Schedule to show the effect of equity attributable
iv. the consequences of losing control of a subsidiary:
1. Gain or loss & line item in profit or loss
2. Gain or loss attributable to FV of investment in Subsidiary
c. Financial statement of subsidiary is of a different date:
i. End of reporting period date of the subsidiary
ii. Reason for using different date
v. Interest in unconsolidated Subsidiaries (by investment entities):
For each unconsolidated subsidiaries
a. Subsidiary name
b. Principal place of business (country of incorporation, if different)
c. Proportion of ownership interest
d. Financial statement of subsidiary & its parent
e. Significant restriction on the ability of an unconsolidated subsidiary:
i. Transfer fund (in form of cash dividends)
ii. Repay loans & advances

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 CONSOLIDATED FINANCIAL STATEMENTS 14.143

f. Current commitments or intention to provide support or assistance

g. Provided any financial support:
i. Type & amount of support
ii. Reason of support
h. Provided any support to previously unconsolidated structured entity, result in
controlling:
i. Reason of support
i. Terms of contractual arrangement-that require to provide financial support
j. Events & circumstances that could expose to risk
vi. Interest in joint arrangements & associates:
a. For nature, extent & financial effect: (for material joint arrangement & associates)
i. Name of joint arrangement or associate
ii. Nature of relationship
iii. Principal place of business (country of incorporation, if different)
iv. Proportion of ownership interest
v. Investment measured using Equity method or FV
vi. Summarized Financial information
vii. Investment valued using equity method-Then FV
viii. Financial information in aggregate for all individually immaterial:
i. Joint ventures
ii. Associates
ix. Significant restriction on the ability of joint ventures or associates:
i. Transfer fund (in form of cash dividends)
ii. Repay loans & advances
x. Financial statement used in applying equity method are of different date:
i. Reporting period end date
ii. Reason of different date
xi. Unrecognized share of losses of JV or associate (stop recognizing loss when
applying equity method)
b. Risk associated:
i. Commitments
ii. Contingent liabilities incurred relating to interest in Joint ventures or associates

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vii. Interest in Unconsolidated structured entities:

a. Nature, extent: exposure of risk
b. Information to enable user to evaluate the nature of and changes in the risk
c. Qualitative & quantitative Information about unconsolidated structured entities
d. Information about sponsored entities:
a. How it has determined-which entity to sponsored
b. Income from that entities
c. Carrying amount of all assets transfer to those entities
e. Information in tabular format
f. Carrying amount of asset & liabilities of those entities, recongnised in financial & line
item in BS statement
g. Amount represent maximum loss & how it determined & if not determined then reason
h. Comparison of above loss with carrying amount of assets & liabilities recongnised
i. Current intention to provide support or assistance
j. Provide any financial support:
a. Type & amount of support
b. Reason of support
viii. Summarized financial Information for subsidiaries, Joint ventures & associates:
a. Subsidiary that has non-controlling interest that are material:
i. Dividends paid
ii. Financial information about asset, liability, profit or loss, cash flow (before
intercompany elimination)
b. Joint ventures and associate that are material:
i. Dividend received
ii. Financial information about asset, liability, profit or loss, cash flow
c. Joint Venture that are material:-
i. Cash & cash equivalent
ii. Current financial liability (excluding trade, trade payables, provisions)
iii. Non Current financial liabilities (excluding trade, trade payables, provisions)
iv. Depreciation & amortization
v. Interest income & expenses
vi. Income tax expenses

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 CONSOLIDATED FINANCIAL STATEMENTS 14.145

d. If entity uses equity method to account for Jv or associates interest:-

i. Ind AS financial statement of JV or associates should be adjusted ( FV adjustment)
ii. Reconciliation of adjustment
iii. But above disclosures are not required if:-
i. FV measured as per Ind AS 28;
ii. JV or associate does not prepare Ind AS financial statement

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 14.146 FINANCIAL REPORTING

TEST YOUR KNOWLEDGE

Questions
1. DEF Ltd. acquired 100% ordinary shares of ` 100 each of XYZ Ltd. on 1st October 20X1.
On March 31, 20X2 the summarised Balance Sheets of the two companies were as given
below:
DEF Ltd. XYZ Ltd.
Assets
Property Plant Equipment
Land & Buildings 15,00,000 18,00,000
Plant & Machinery 24,00,000 13,50,000
Investment in XYZ Ltd. 34,00,000 -
Inventory 12,00,000 3,64,000
Financial Assets
Trade Receivable 5,98,000 4,00,000
Cash 1,45,000 80,000
Total 92,43,000 39,94,000
Equities & Liabilities
Equity Capital (Shares of ` 100 each fully paid) 50,00,000 20,00,000
Other Equity
Other reserves 24,00,000 10,00,000
Retained Earnings 5,72,000 8,20,000
Financial Liabilities
Bank Overdraft 8,00,000 -
Trade Payable 4,71,000 1,74,000
Total 92,43,000 39,94,000
The retained earnings of XYZ Ltd. showed a credit balance of ` 3,00,000 on 1st April 20X1
out of which a dividend of 10% was paid on 1st November; DEF Ltd. has recognised the
dividend received to profit or loss account; Fair Value of P& M as on 1st October 20X1 was
` 20,00,000. The rate of depreciation on plant & machinery is 10%.

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 CONSOLIDATED FINANCIAL STATEMENTS 14.147

Following are the increases on comparison of Fair value as per respective Ind AS with Book
value as on 1st October 20X1 which are to be considered while consolidating the Balance
Sheets.
Liabilities Amount Assets Amount
Trade Payables 1,00,000 Land & Buildings 10,00,000
Inventories 1,50,000
Note:
1. It may be assumed that the inventory is still unsold on balance sheet date and the Trade
Payables are also not yet settled.
2. Also assume that the Other Reserves of both the companies as on 31st March 20X2 are
the same as was on 1 st April 20X1.
3. All fair value adjustments have not yet started impacting consolidated post-acquisition
profits.
Prepare consolidated Balance Sheet as on March 31, 20X2.
2. Ram Ltd. acquired 60% ordinary shares of ` 100 each of Krishan Ltd. on 1st October 20X1. On
March 31, 20X2 the summarised Balance Sheets of the two companies were as given below:
Ram Ltd. Krishan Ltd.
Assets
Property, Plant and Equipment
Land & Buildings 3,00,000 3,60,000
Plant & Machinery 4,80,000 2,70,000
Investment in Krishan Ltd. 8,00,000 -
Inventory 2,40,000 72,800
Financial Assets
Trade Receivables 1,19,600 80,000
Cash 29,000 16,000
Total 19,68,600 7,98,800
Equity & Liabilities
Equity Capital (Shares of ` 100 each fully paid) 10,00,000 4,00,000
Other Equity
Other Reserves 6,00,000 2,00,000
Retained earnings 1,14,400 1,64,000
Financial Liabilities
Bank Overdraft 1,60,000 -
Trade Payable 94,200 34,800
Total 19,68,600 7,98,800

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 14.148 FINANCIAL REPORTING

The Retained earnings of Krishan Ltd. showed a credit balance of ` 60,000 on 1st April 20X1
out of which a dividend of 10% was paid on 1st November; Ram Ltd. has credited the dividend
received to its Retained earnings; Fair Value of P& M as on 1 st October 20X1 was ` 4,00,000;
The rate of depreciation on plant & machinery is 10%.
Following are the increases on comparison of Fair value as per respective Ind AS with book
value as on 1st October 20X1 which are to be considered while consolidating the Balance
Sheets.
Liabilities Amount Assets Amount
Trade Payables 20,000 Land & Buildings 2,00,000
Inventories 30,000

Note:
1. It may be assumed that the inventory is still unsold on balance sheet date and the Trade
Payables are also not yet settled.
2. Also assume that the Other Reserves as on 31st March 20X2 are the same as was on
1st April 20X1.
Prepare consolidated Balance Sheet as on March 31, 20X2.
3. On 31 March 20X2, Blue Heavens Ltd. acquired 100% ordinary shares carrying voting rights
of Orange County Ltd. for ` 6,000 lakh in cash and it controlled Orange County Ltd. from
that date. The acquisition-date statements of financial position of Blue Heavens Ltd. and
Orange County Ltd. and the fair values of the assets and liabilities recognised on Orange
County Ltd. statement of financial position were:
Blue Heavens Ltd. Orange County Ltd.
Carrying Amount Carrying Fair Value
(` in lakh) Amount (` in lakh)
(` in lakh)
Assets
Non-current assets
Building and other PPE 7,000 3,000 3,300
Investment in Orange County Ltd. 6,000
Current assets
Inventories 700 500 600
Trade receivables 300 250 250
Cash 1,500 700 700
Total assets 15,500 4,450

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 CONSOLIDATED FINANCIAL STATEMENTS 14.149

Equity and liabilities

Equity
Share capital 5,000 2,000
Retained earnings 10,200 2,300
Current liabilities
Trade payables 300 150 150
Total liabilities and equity 15,500 4,450
Prepare the Consolidated Balance Sheet as on March 31, 20X2 of group of entities Blue
Heavens Ltd. and Orange County Ltd.
4. The facts are the same as in Question 3 above. However, Blue Heavens Ltd. acquires only
75% of the ordinary shares, to which voting rights are attached of Orange County Ltd. Blue
Heavens Ltd. pays ` 4,500 lakhs for the shares. Prepare the Consolidated Balance Sheet
as on March 31, 20X2 of group of entities Blue Heavens Ltd. and Orange County Ltd.
5. Facts are same as in Question 3 & 4, Blue Heavens Ltd. acquires 75% of Orange County
Ltd. Blue Heavens Ltd. pays ` 4,500 lakhs for the shares. At 31 March 20X3, i.e one year
after Blue Heavens Ltd. acquired Orange County Ltd., the individual statements of financial
position and statements of comprehensive income of Blue Heavens Ltd. and Orange County
Ltd. are:
Blue Heavens Ltd. Orange County Ltd.
Carrying Amount Carrying Amount
(` in lakh) (` in lakh)
Assets
Non-current assets
PPE (Building and others) 6,500 2,750
Investment in Orange County Ltd. 4,500
11,000 2,750
Current assets
Inventories 800 550
Financial Asset -Trade receivables 380 300
Cash 4,170 1,420
5,350 2,270
Total assets 16,350 5,020
Equity and liabilities
Equity
Share capital 5,000 2,000

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 14.150 FINANCIAL REPORTING

Retained earnings 11,000 2,850

16,000 4,850
Current liabilities
Financial Liabilities-Trade payables 350 170
350 170
Total liabilities and equity 16,350 5,020
Statements of Profit and Loss for the year ended 31 March 20X3:
Blue Heavens Ltd. Orange County Ltd.
Carrying Amount Carrying Amount
(` in lakh) (` in lakh)
Revenue 3,000 1,900
Cost of sales (1,800) (1,000)
Administrative expenses (400) (350)
Profit for the year 800 550
Note: Blue Heavens Ltd. estimates that goodwill has impaired by 98. The fair value
adjustment to buildings and other PPE is in respect of a building; all buildings have an
estimated remaining useful life of 20 years from 31 March 20X2 and estimated residual
values of zero. Blue Heavens Ltd. uses the straight-line method for depreciation of PPE. All
the inventory held by Orange County Ltd. at 31 March 20X2 was sold during 20X3.
Prepare the Consolidated Balance Sheet as on March 31, 20X3 of group of entities
Blue Heavens Ltd. and Orange County Ltd.
6. P Pvt. Ltd. has a number of wholly-owned subsidiaries including S Pvt. Ltd. at 31 st March
20X2. P Pvt. Ltd. consolidated statement of financial position and the group carrying amount
of S Pvt. Ltd. assets and liabilities (ie the amount included in that consolidated statement of
financial position in respect of S Pvt. Ltd. assets and liabilities) at 31 st March 20X2 are as
follows:
Particulars Consolidated Group carrying amount of S
(` in Pvt. Ltd. asset and liabilities
millions) Ltd. (` in millions)
Assets
Non-Current Assets
Goodwill 380 180
Buildings 3,240 1,340
Current Assets
Inventories 140 40
Trade Receivables 1,700 900

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 CONSOLIDATED FINANCIAL STATEMENTS 14.151

Cash 3,100 1000

Total Assets 8,560 3,460
Equities & Liabilities
Equity
Share Capital 1600
Other Equity
Retained Earnings 4,260
Current liabilities
Trade Payables 2,700 900
Total Equity & Liabilities 8,560 900
Prepare consolidated Balance Sheet after disposal as on 31 st March, 20X2 when P Pvt. Ltd.
group sold 100% shares of S Pvt. Ltd. to independent party for ` 3,000 millions.
7. Reliance Ltd. has a number of wholly-owned subsidiaries including Reliance Jio Infocomm
Ltd. at 31st March 20X2.
Reliance Ltd. consolidated statement of financial position and the group carrying amount of
Reliance Jio Infocomm Ltd. assets and liabilities (ie the amount included in that consolidated
statement of financial position in respect of Reliance Jio Infocomm Ltd. assets and liabilities)
at 31st March 20X2 are as follows:
Particulars Consolidated Group carrying amount of Reliance
(` In ‘000) Jio Infocomm Ltd. asset and
liabilities Ltd. (` In ‘000)
Assets
Non-current Assets
Goodwill 190 90
Buildings 1,620 670
Current Assets
Inventories 70 20
Financial Assets
Trade Receivables 850 450
Cash 1,550 500
Total Assets 4,280 1,730
Equity & Liabilities
Equity
Share Capital 800
Other Equity

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 14.152 FINANCIAL REPORTING

Retained Earnings 2,130

2,930
Current liabilities
Financial liabilities
Trade Payables 1,350 450
Total Equity & Liabilities 4,280 450
Prepare consolidated Balance Sheet after disposal as on 31 st March, 20X2 when Reliance
Ltd. group sold 90% shares of Reliance Jio Infocomm Ltd. to independent party for ` 1000
thousand.
8. Airtel Telecommunications Ltd. owns 100% share capital of Airtel Infrastructures Pvt. Ltd. On
1 April 20X1 Airtel Telecommunications Ltd. acquired a building from Airtel Infrastructures
Pvt. Ltd., for ` 11,00,000 that the group plans to use as its new headquarters office.
Airtel Infrastructures Pvt. Ltd. had purchased the building from a third party on 1 April 20X0
for ` 10,25,000. At that time the building was assessed to have a useful life of 21 years and
a residual value of ` 5,00,000. On 1 April 20X1 the carrying amount of the building was
` 10,00,000 in Airtel Infrastructures Pvt. Ltd.’s individual accounting records.
The estimated remaining useful life of the building measured from 1 April 20X1 is 20 years
and the residual value of the building is now estimated at ` 3,50,000. The method of
depreciation is straight-line.
Pass necessary accounting entries in individual and consolidation situations.
9. As at the beginning of its current financial year, AB Limited holds 90% equity interest in BC
Limited. During the financial year, AB Limited sells 70% of its equity interest in BC Limited
to PQR Limited for a total consideration of ` 56 crore and consequently loses control of BC
Limited. At the date of disposal, fair value of the 20% interest retained by AB Limited is ` 16
crore and the net assets of BC Limited are fair valued at ` 60 crore.
These net assets include the following:
(a) Debt investments classified as fair value through other comprehensive income (FVOCI)
of ` 12 crore and related FVOCI reserve of ` 6 crore.
(b) Net defined benefit liability of ` 6 crore that has resulted in a reserve relating to net
measurement losses of ` 3 crore.
(c) Equity investments (considered not held for trading) of ` 10 crore for which irrevocable
option of recognising the changes in fair value in FVOCI has been availed and related
FVOCI reserve of ` 4 crore.
(d) Net assets of a foreign operation of ` 20 crore and related foreign currency translation
reserve of ` 8 crore.
In consolidated financial statements of AB Limited, 90% of the above reserves were included
in equivalent equity reserve balances, with the 10% attributable to the non-controlling interest
included as part of the carrying amount of the non-controlling interest.

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 CONSOLIDATED FINANCIAL STATEMENTS 14.153

What would be the accounting treatment on loss of control in the consolidated financial
statements of AB Limited?
Answers
1 Consolidated Balance Sheet of DEF Ltd. and its subsidiary, XYZ Ltd.
as on 31st March, 20X2
Particulars Note No. `
I. Assets
(1) Non-current assets
(i) Property Plant & Equipment 1 86,00,000
(2) Current Assets
(i) Inventories 2 17,14,000
(ii) Financial Assets
(a) Trade Receivables 3 9,98,000
(b) Cash & Cash equivalents 4 2,25,000
Total Assets 1,15,37,000
II. Equity and Liabilities
(1) Equity
(i) Equity Share Capital 5 50,00,000
(ii) Other Equity 6 49,92,000
(2) Current Liabilities
(i) Financial Liabilities
(a) Trade Payables 7 7,45,000
(b) Short term borrowings 8 8,00,000
Total Equity & Liabilities 1,15,37,000
Notes to Accounts
`
1. Property Plant & Equipment
Land & Building 43,00,000
Plant & Machinery 43,00,000 86,00,000
2. Inventories
DEF Ltd. 12,00,000
XYZ Ltd. 5,14,000 17,14,000

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3. Trade Receivables
DEF Ltd. 5,98,000
XYZ Ltd. 4,00,000 9,98,000
4. Cash & Cash equivalents
DEF Ltd. 1,45,000
XYZ Ltd. 80,000 2,25,000
7. Trade payable
DEF Ltd. 4,71,000
XYZ Ltd. 2,74,000 7,45,000
8. Shorter-term borrowings
Bank overdraft 8,00,000
Statement of Changes in Equity:
5. Equity share Capital
Balance at the Changes in Equity share Balance at the end of the
beginning of the capital during the year reporting period
reporting period
50,00,000 0 50,00,000
6. Other Equity
Share Equity Reserves & Surplus Total
application component
Capital Retained Other
money of
reserve Earnings Reserves
pending compound
allotment financial
instrument
Balance at the
beginning 0 24,00,000 24,00,000
Total
comprehensive
income for the
year 0 5,72,000 5,72,000
Dividends 0 (2,00,000) (2,00,000)
Total
comprehensive
income

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 CONSOLIDATED FINANCIAL STATEMENTS 14.155

attributable to
parent 0 3,35,000 3,35,000
Gain on
Bargain
purchase 18,85,000 18,85,000
Balance at the
end of reporting
period 18,85,000 7,07,000 24,00,000 49,92,000

It is assumed that there exists no clear evidence for classifying the acquisition of the
subsidiary as a bargain purchase and, hence, the bargain purchase gain has been
recognised directly in capital reserve. If, however, there exists such a clear evidence,
the bargain purchase gain would be recognised in other comprehensive income and then
accumulated in capital reserve. In both the cases, closing balance of capital reserve will
be ` 18,85,000.
Working Notes:
1. Adjustments of Fair Value
The Plant & Machinery of XYZ Ltd. would stand in the books at ` 14,25,000 on
1st October, 20X1, considering only six months’ depreciation on ` 15,00,000 total
depreciation being ` 1,50,000. The value put on the assets being ` 20,00,000 there is
an appreciation to the extent of ` 5,75,000.
2. Acquisition date profits of XYZ Ltd. `
Reserves on 1.4. 20X1 10,00,000
Profit & Loss Account Balance on 1.4. 20X1 3,00,000
Profit for 20X2: Total ` 8,20,000 less
` 1,00,000 (3,00,000 – 2,00,000) i.e.
` 7,20,000; for 6 months ie. upto 1.10.20X1 3,60,000
Total Appreciation including machinery
appreciation (10,00,000 1,50,000 + 5,75,000
– 1,00,000) 16,25,000
Share of DEF Ltd. 32,85,000

3. Post-acquisition profits of XYZ Ltd. `

Profit after 1.10. 20X1 [8,20,000-1,00,000]x 6/12 3,60,000

Less: 10% depreciation on ` 20,00,000 for 6 months less
depreciation already charged for 2 nd half of 20X1-20X2 on
` 15,00,000 (1,00,000-75,000) (25,000)
Share of DEF Ltd. 3,35,000

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 14.156 FINANCIAL REPORTING

4. Consolidated total comprehensive income `

DEF Ltd.
Retained earnings on 31.3.20X2 5,72,000
Less: Retained earnings as on 1.4.20X1 (0)
Profits for the year 20X1-20X2 5,72,000
Less: Elimination of intra-group dividend (2,00,000)
Adjusted profit for the year 3,72,000
XYZ Ltd.
Adjusted profit attributable to DEF Ltd. (W.N.3) 3,35,000
Consolidated profit or loss for the year 7,07,000

5. No Non-controlling Interest as 100% shares of XYZ Ltd. are held by DEF Ltd.
6. Gain on Bargain Purchase `
Amount paid for 20,000 shares 34,00,000
Par value of shares 20,00,000
DEF Ltd.’s share in acquisition date profits of XYZ Ltd. 32,85,000 (52,85,000)
Gain on Bargain Purchase 18,85,000

7. Value of Plant & Machinery `

DEF Ltd. 24,00,000
XYZ Ltd. 13,50,000
Add: Appreciation on 1.10. 20X1 5,75,000
19,25,000
Add: Depreciation for 2nd half charged on pre-
revalued value 75,000
Less: Depreciation on ` 20,00,000 for 6 months (1,00,000) 19,00,000
43,00,000

8. Consolidated retained earnings `

DEF Ltd. XYZ Ltd. Total
As given 5,72,000 8,20,000 13,92,000
Consolidation Adjustments:
(i) Elimination of pre-acquisition element 0 (6,60,000) (6,60,000)
[3,00,000 + 3,60,000]

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 CONSOLIDATED FINANCIAL STATEMENTS 14.157

(ii) Elimination of intra-group dividend (2,00,000) 2,00,000 0

(iii) Impact of fair value adjustments 0 (25,000) (25,000)
Adjusted retained earnings consolidated 3,72,000 3,35,000 7,07,000

Assumptions:
1. Investment in XYZ Ltd is carried at cost in the separate financial statements of DEF Ltd.
2. Appreciation of `10 lakhs in land & buildings is entirely attributable to land element only.
3. Depreciation on plant and machinery is on WDV method.
4. Acquisition-date fair value adjustment to inventories of XYZ Ltd. existing at the balance
sheet date does not result in need for any write-down.
2 Consolidated Balance Sheet of Ram Ltd. and its subsidiary, Krishan Ltd.
as on 31 st March, 20X2
Particulars Note No. `
I. Assets
(1) Non-current assets
(i) Property, Plant & Equipment 1 17,20,000
(ii) Goodwill 2 1,65,800
(2) Current Assets
(i) Inventories 3 3,42,800
(ii) Financial Assets
(a) Trade Receivables 4 1,99,600
(b) Cash & Cash equivalents 5 45,000
Total Assets 24,73,200
II. Equity and Liabilities
(1) Equity
(i) Equity Share Capital 6 10,00,000
(ii) Other Equity 7 7,30,600
(2) Non-controlling Interest (WN 5) 4,33,600
(3) Current Liabilities
(i) Financial Liabilities
(a) Trade Payables 8 1,49,000
(b) Short term borrowings 9 1,60,000
Total Equity & Liabilities 24,73,200

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 14.158 FINANCIAL REPORTING

Notes to accounts

`
1. Property Plant & Equipment
Land & Building 8,60,000
Plant & Machinery 8,60,000 17,20,000
2. Goodwill 1,65,800
3. Inventories
Ram Ltd. 2,40,000
Krishan Ltd. 1,02,800 3,42,800
4. Trade Receivables
Ram Ltd. 1,19,600
Krishan Ltd. 80,000 1,99,600
5. Cash & Cash equivalents
Ram Ltd. 29,000
Krishan Ltd. 16,000 45,000
8. Trade Payables
Ram Ltd. 94,200
Krishan Ltd. 54,800 1,49,000
9. Short-term borrowings
Bank overdraft 1,60,000

Statement of Changes in Equity:

6. Equity share Capital
Balance at the Changes in Equity share Balance at the end of the
beginning of the capital during the year reporting period
reporting period
10,00,000 0 10,00,000

7. Other Equity
Share Equity Reserves & Surplus Total
application component Capital Retained Other
money reserve Earnings Reserves
Balance at the
beginning of the
reporting period 0 6,00,000 6,00,000

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 CONSOLIDATED FINANCIAL STATEMENTS 14.159

Total
comprehensive
income for the
year 0 1,14,400 1,14,400
Dividends 0 (24,000) (24,000)
Total
comprehensive
income
attributable to
parent 0 40,200 40,200
Gain on Bargain 0 0
purchase
Balance at the
end of reporting
period 1,30,600 6,00,000 7,30,600

Working Notes:
1. Adjustments of Fair Value
The Plant & Machinery of Krishan Ltd. would stand in the books at ` 2,85,000 on
1 st October, 20X1, considering only six months’ depreciation on ` 3,00,000 total
depreciation being ` 30,000. The value put on the assets being ` 4,00,000 there is an
appreciation to the extent of ` 1,15,000.
2. Acquisition date profits of Krishan Ltd.
Reserves on 1.4. 20X1 2,00,000
Profit & Loss Account Balance on 1.4. 20X1 60,000
Profit for 20X1-20X2: Total (` 1,64,000 less
` 20,000) x 6/12 i.e. ` 72,000; upto 1.10. 20X1 72,000
Total Appreciation 3,25,000
Total 6,57,000
Holding Co. Share (60%) 3,94,200

3. Post-acquisition profits of Krishan Ltd.

Profit after 1.10. 20X1 [1,64,000-20,000]x 6/12 72,000
Less: 10% depreciation on ` 4,00,000 for 6 months less
depreciation already charged for 2 nd half of 20X1-20X2 on
` 3,00,000 (20,000-15,000) (5,000)
Total 67,000
Share of holding Co. (60%) 40,200

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 14.160 FINANCIAL REPORTING

4. Non-controlling Interest
Par value of 1600 shares 160,000
Add: 2/5 Acquisition date profits (6,57,000 – 40,000) 2,46,800
2/5 Post-acquisition profits [WN 4] 26,800
4,33,600

5. Goodwill:
Amount paid for 2,400 shares 8,00,000
Par value of shares 2,40,000
Acquisition date profits share of Ram Ltd. 3,94,200 (6,34,200)
Goodwill 1,65,800

6. Value of Plant & Machinery:

Ram Ltd. 4,80,000
Krishan Ltd. 2,70,000
Add: appreciation on 1.10. 20X1 1,15,000
3,85,000
Add: Depreciation for 2nd half charged on pre-revalued
value 15,000
Less: Depreciation on ` 4,00,000 for 6 months (20,000) 3,80,000
8,60,000

7. Profit & Loss account consolidated

Ram Ltd. (as given) 1,14,400
Less: Dividend (24,000) 90,400
Share of Ram Ltd. in post-acquisition profits 40,200
1,30,600
3. Blue Heavens Ltd. consolidated statement of financial position at 31 March 20X2 will be
calculated as follows: (in lakhs)
Blue Orange Consolidation Consolidated Blue
Heavens Ltd. County Ltd. adjustments Heavens Ltd.
Carrying Carrying
amount amount
Assets
Non-current
assets
Goodwill 1,300 (WN 1) 1,300

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 CONSOLIDATED FINANCIAL STATEMENTS 14.161

Buildings and 7,000 3,000 300 10,300

other PPE
Financial
Assets
Investment in
Orange County 6,000 (6,000)
Ltd.
Current assets
Inventories 700 500 100 1,300
Financial
Assets
Trade
receivables 300 250 550
Cash 1,500 700 2,200
Total assets 15,500 4,450 15,650
Equity and
liabilities
Equity
Share capital 5,000 2,000 (2,000) 5,000
Other Equity 10,200 2,300 (2,300) 10,200
Trade payable 300 150 450
Total liabilities 15,500 4,450 15,650
and equity

Consolidation involves:
• Adding the statement of financial position of the parent and its subsidiary together line
by line.
• Eliminating the carrying amount of the parent’s investment in the subsidiary (because it
is replaced by the goodwill and the fair value of the assets, liabilities and contingent
liabilities acquired) and the pre-acquisition equity of the subsidiary (because that equity
was not earned or contributed by the group but is part of what was purchased) and
recognising the fair value adjustments together with the goodwill asset that arose on
acquisition of the subsidiary.
1. Working for goodwill: (` in lakhs)
Consideration paid 6,000
Less: Acquisition date fair value of Orange County Ltd. net assets (4,700)
Goodwill 1,300

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 14.162 FINANCIAL REPORTING

2. Working for the acquisition date fair value of Orange County Ltd. net assets:
Acquisition date fair value of acquiree (Orange County Ltd.) assets
Buildings and other PPE 3,300
Inventories 600
Trade receivables 250
Cash 700
Less: fair value of trade payables (150)
Fair value of net assets acquired 4,700
4. Non-controlling interest
= 25 % × Orange County Ltd. identifiable net assets at fair value of ` 4,700
= ` 1,175.
Blue Heavens Ltd. consolidated statement of financial position at 31 March 20X2 will be
calculated as follows:
(in lakhs)
Blue Heavens Orange Consolidation Consolidated
Ltd. County Ltd. adjustments Blue Heavens
Ltd.
Carrying Carrying
amount amount
Assets
Non-current
assets
Goodwill 975 (WN 1) 975
Buildings and
other PPE 7,000 3,000 300 10,300
Financial
Assets
Investment in
4,500 (4,500)
Orange
County Ltd.
Current
assets
Inventories 700 500 100 1,300
Financial
Assets

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 CONSOLIDATED FINANCIAL STATEMENTS 14.163

Trade
receivables 300 250 550
Cash 3,000 700 3,700
Total assets 15,500 4,450 16,825
Equity and
liabilities
Equity
Share capital 5,000 2,000 (2,000) 5,000
Other Equity 10,200 2,300 (2,300) 10,200

Non-
controlling 1,175 1,175
interest
Current
liabilities
Financial
Liabilities
Trade
payables 300 150 450
Total
liabilities and
equity 15,500 4,450 16,825

Note: In this question, Blue Heavens Ltd.’s (and consequently the group’s) cash balance is
` 1,500 lakh higher than in Question above because, in this example, Blue Heavens Ltd.
paid ` 1,500 less to acquire Orange County Ltd. (ie ` 6,000 less ` 4,500).
1. Working for goodwill: (` in lakhs)
Consideration paid 4,500
Non- controlling interest 1,175
Less: Acquisition date fair value of Orange County Ltd. net assets 4,700
(cal. as above)
Goodwill 975
(Goodwill recognised in the consolidated statement of financial position relates solely to
the acquirer’s proportion of the subsidiary; it does not include the non-controlling
interest’s share).

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 14.164 FINANCIAL REPORTING

5. Alternative I for calculation of Non-controlling Interest:

The Non-controlling Interest proportion of Orange County Ltd. is 25 %.
At 31 March 20X3, the NCI in the consolidated statement of financial position would be
calculated as:
` (lakh)
NCI at date of acquisition (31 March 20X2) (see solution to Question 4) 1,175
NCI’s share of profit for the year ended 31 March 20X3, being 25%
Of ` 435 lakh (being ` 550 profit of Orange County Ltd. as per
Orange County Ltd. financial statements less ` 100 group inventory
Fair value adjustment less ` 15 group depreciation on building
fair value adjustment)* 109
NCI as at 31 March 20X3 1,284
*In calculating the NCI’s share of profit for the year ended 31 March 20X3, no deduction is
made for goodwill amortisation because, as explained above, the goodwill arising on
consolidation relates solely to the acquirer’s proportion of the subsidiary and does not include
the non-controlling interest’s share.
Alternative II for calculation of Non-controlling Interest:
As an alternative to the above three-step approach, at 31 March 20X3 the NCI in the
consolidated statement of financial position is calculated as 25% (the NCI's proportion) of
` 5,135, which is ` 1,284. ` 5,135 is Orange County Ltd. net assets at 31 March 20X3 as
shown in Orange County Ltd. statement of financial position (` 4,850, being ` 5,020 assets
less ` 170 liabilities) plus the fair value adjustment to those assets as made in preparing the
group statement of financial position (` 285, being the fair value adjustment in respect of
Orange County Ltd. building, ` 300, less one year’s depreciation of that adjustment, ` 15).
Blue Heavens Ltd. consolidated statement of comprehensive income for the year ended 31
March 20X3 will be computed as follows:
Blue Orange Consolidate Consolidated
Heavens Ltd. County Ltd. adjustments
Revenue 3,000 1,900 4,900
Cost of sales (1,800) (1,000) (100) (WN 1) (2,900)
Profit for the year 1,200 900 2,000
Administrative
expenses (400) (350) (113) (WN 2) (863)

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 CONSOLIDATED FINANCIAL STATEMENTS 14.165

Total
comprehensive
income for the year 800 550 1,137
Total comprehensive income attributable to:
Owners of the parent (75%) 1,028
Non-controlling interest (25%) 109
1,137
Consolidation involves:
• Adding the statement of comprehensive income of the parent and its subsidiary together
line by line
• Recognising the fair value adjustments and/ or amortisation thereof together with
amortisation of the goodwill asset that arose on acquisition of the subsidiary.
Blue Heavens Ltd. consolidated statement of financial position at 31 March 20X3 will be
computed as follows: (` in lakh)
Blue Orange Consolidation Consolidated
Heavens County Ltd. adjustments Blue Heavens
Ltd. Ltd.
Carrying Carrying
amount amount
Assets
Non-current
assets
Goodwill 975-98 (WN 3) 877
Buildings and
other PPE 6,500 2,750 285 (WN 4) 9,535
Financial Assets
Investment in
Entity B 4,500 (4,500)
Current assets
Inventories 800 550 1,350
Financial Assets
Trade receivables 380 300 680
Cash 4,170 1420 5,590
Total assets 16,350 5,020 18,032
Equity and
liabilities
Equity

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 14.166 FINANCIAL REPORTING

Share capital 5,000 2,000 (2,000) 5,000

Other Equity 11,000 2,850 (2,622) (WN 5) 11,228
Non-controlling 1,284 1,284
interest
Current
liabilities
Financial
Liabilities
Trade payables 350 170 520
Total liabilities
and equity 16,350 5,020 18,032

Consolidation involves:
• Adding the statement of financial position of the parent and its subsidiary together line
by line.
• Eliminating the carrying amount of the parent’s investment in the subsidiary (because it
is replaced by the goodwill and the fair value of the assets, liabilities and contingent
liabilities acquired) and the pre-acquisition equity of the subsidiary (because that equity
was not earned or contributed by the group but is part of what was purchased), and
recognising the fair value adjustments together with the goodwill asset that arose on
acquisition of the subsidiary as adjusted to reflect the first year post-acquisition
• Recognising the non-controlling interest in the net assets of Entity B.
Working Notes:
(1) Cost of sales adjustment:
` 100 = fair value adjustment in respect of inventories at 31 March 20X2.
(2) Administrative expenses adjustment:
` 113 = Amortisation of goodwill ` 98 (WN 3) + additional depreciation on building ` 15
(WN 4).
For simplicity it is assumed that all the goodwill amortisation and the additional buildings
depreciation is adjusted against administrative expenses.
(3) Working for goodwill:
Goodwill at the acquisition date, ` 975, less accumulated amortisation, which this year
is amortisation for one year, ` 98 approx. (ie ` 975 ÷ 10 years) = ` 877.
(4) Working for building consolidation adjustment:
The fair value adjustment at 31 March 20X2 in respect of Orange County Ltd. building
was ` 300, that is, the carrying amount at 31 March 20X2 was ` 300 lower than was

© The Institute of Chartered Accountants of India

 CONSOLIDATED FINANCIAL STATEMENTS 14.167

recognised in the group’s consolidated statement of financial position. The building is

being depreciated over 20 years from 31 March 20X2. Thus at 31 March 20X3 the
adjustment required on consolidation to the statement of financial position will be ` 285,
being ` 300 × 19/20 years’ estimated useful life remaining. The additional depreciation
recognised in the consolidated statement of comprehensive income is ` 15 (being
` 300 x 1/20).
(5) Reserves adjustment:
` 2,300 adjustment at the acquisition date (Illustration 4) plus ` 98 (WN 3) amortisation
of goodwill plus ` 15 (WN 4) additional depreciation on building plus ` 100 (WN 1) fair
value adjustment in respect of inventories plus ` 109 NCI’s share of Orange County
Ltd. profit for the year (as included in the consolidated statement of comprehensive
income) = ` 2,622.
6. When 100% shares sold to independent party
Consolidated Balance Sheet of P Pvt. Ltd. and its remaining subsidiaries
as on 31st March, 20X2
Particulars Note (` in
No. millions)
I. Assets
(1) Non-current assets
(i) Property Plant & Equipment 1 1,900
(ii) Goodwill 2 200
(2) Current Assets
(i) Inventories 3 100
(ii) Financial Assets
(a) Trade Receivables 4 800
(b) Cash & Cash equivalents 5 5,100
Total Assets 8,100
II. Equity and Liabilities
(1) Equity
(i) Equity Share Capital 6 1,600
(ii) Other Equity 7 4,700
(2) Non-controlling Interest
(3) Current Liabilities
(i) Financial Liabilities
(a) Trade Payables 8 1,800
Total Equity & Liabilities 8,100

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 14.168 FINANCIAL REPORTING

Notes to accounts:
(` in millions)
1. Property Plant & Equipment
Land & Building 3,240
Less: S Pvt. Ltd. (1,340) 1,900

2. Goodwill 380
Less: S Pvt. Ltd. (180) 200

3. Inventories
Group 140
Less: S Pvt. Ltd. (40) 100

4. Trade Receivables
Group 1,700
Less: S Pvt. Ltd. (900) 800

5. Cash & Cash equivalents

Group (WN 2) 5,100 5,100

8. Trade Payables
Group 2,700
Less: S Pvt. Ltd. 900 1,800
Statement of changes in Equity:
6. Equity share Capital
Balance at the Changes in Equity Balance at the end of the
beginning of the share capital during reporting period
reporting period the year
1600 0 1600
7. Other Equity
Share Equity Reserves & Surplus Total
application component
money Capital Retained Securities
reserve Earnings Premium
Balance at the 4,260 4,260
beginning

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 CONSOLIDATED FINANCIAL STATEMENTS 14.169

Total 0
comprehensive
income for the
year
Dividends 0
Total 0
comprehensive
income
attributable to
parent
Gain on 440 440
disposal of S
Pvt. Ltd.
Balance at the 0 4,700 4,700
end of reporting
period

Working Notes:
1. When sold, the carrying amount of all assets and liabilities attributable to S Pvt. Ltd.
were eliminated from the consolidated statement of financial position.
2. Cash on hand (in millions):
Cash before disposal of S Pvt. Ltd. 3,100
Less: S Pvt. Ltd. Cash (1,000)
Add: Cash realized from disposal 3,000
Cash on Hand 5,100
3. Gain/ Loss on disposal of entity (in millions):
Proceeds from disposal 3,000
Less: Net assets of S Pvt. Ltd. (2,560)
Gain on disposal 440
4. Retained Earnings (in millions):
Retained Earnings before disposal 4,260
Add: Gain on disposal 440
Retained earnings after disposal 4,700

© The Institute of Chartered Accountants of India

 14.170 FINANCIAL REPORTING

7. When 90% shares sold to independent party

Consolidated Balance Sheet of Reliance Ltd. and its remaining subsidiaries
as on 31st March, 20X2
Particulars Note (` In ‘000)
No.
I. Assets
(1) Non-current assets
(i) Property Plant & Equipment 1 950
(ii) Goodwill 2 100
(iii) Financial Assets
(a) Investments 3 128
(2) Current Assets
(i) Inventories 4 50
(ii) Financial Assets
(b) Trade Receivables 5 400
(c) Cash & Cash equivalents 6 2,050
Total Assets 3,678
II. Equity and Liabilities
(1) Equity
(i) Equity Share Capital 7 800
(ii) Other Equity 8 1,978
(2) Current Liabilities
(i) Financial Liabilities
(a) Trade Payables 9 900
Total Equity & Liabilities 3,678

Notes to accounts:
(` In ‘000)
1. Property Plant & Equipment
Land & Building 1620
Less: Reliance Jio Infocomm Ltd. (670) 950

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 CONSOLIDATED FINANCIAL STATEMENTS 14.171

2. Goodwill 190
Less: Reliance Jio Infocomm Ltd. (90) 100
3. Investments
Investment in Reliance Jio Infocomm Ltd. (WN 2) 128 128
4. Inventories
Group 70
Less: Reliance Jio Infocomm Ltd. (20) 50
5. Trade Receivables
Group 850
Less: Reliance Jio Infocomm Ltd. (450) 400
8. Cash & Cash equivalents
Group (WN 3) 2,050 2,050
Trade Payables
Group 1,350
Less: Reliance Jio Infocomm Ltd. 450 900

Statement of changes in Equity:

6. Equity share Capital
Balance at the beginning Changes in Equity Balance at the end of
of the reporting period share capital during the the reporting period
year
800 0 800

7. Other Equity
Share Equity Reserves & Surplus Total
application component Capital Retained Securities
money reserve Earnings Premium
Balance at the 2,130 2,130
beginning
Total 0
comprehensive
income for the
year
Dividends 0
Total 0
comprehensive

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 14.172 FINANCIAL REPORTING

income
attributable to
parent
Loss on (152) (152)
disposal of
Reliance Jio
Infocomm Ltd.
Balance at the 0 1,978 1,978
end of reporting
period

Working Notes:
1. When 90% being sold, the carrying amount of all assets and liabilities attributable to
Reliance Jio Infocomm Ltd. were eliminated from the consolidated statement of financial
position and further financial asset is recognized for remaining 10%.
2. Fair value of remaining investment (in ‘000):
Net Assets of Reliance Ltd. 1,280
Less: 90% disposal (1152)
Financial Asset 128

3. Cash on hand (in ‘000):

Cash before disposal of Reliance Jio Infocomm Ltd. 1,550
Less: Reliance Jio Infocomm Ltd. Cash (500)
Add: Cash realized from disposal 1,000
Cash on Hand 2,050

4. Gain/ Loss on disposal of entity (in ‘000):

Proceeds from disposal 1,000
Less: Proportionate (90%) Net assets of Reliance Jio
Infocomm Ltd. (90% of 1,280) (1,152)
Loss on disposal (152)

5. Retained Earnings (in ‘000):

Retained Earnings before disposal 2,130
Less: Loss on disposal (152)
Retained earnings after disposal 1,978

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 CONSOLIDATED FINANCIAL STATEMENTS 14.173

8. Journal Entries in Airtel Infrastructures Pvt. Ltd.

1. Assets(Land) A/c Dr. 10,25,000
To cash 10,25,000
2. Depreciation (P/L) A/c Dr. 25,000
To Asset (Land) 25,000
3. Cash A/c Dr. 11,00,000
To Asset (Land) 10,00,000
To P/L 1,00,000
Journal Entries in Airtel Telecommunications Ltd.
1. Asset (Land) A/c Dr. 11,00,000
To Cash 11,00,000
2. Depreciation (P/L) A/c Dr. 37,500
To Assets (Land) 37,500
Journal entry for consolidation:
1. Asset (Land) A/c Dr. 5,000 (WN 1)
To Consolidated P&L 5,000
Working Note:
To be depreciated on original value (10,00,000-3,50,000)/20 32,500
Depreciation charged (11,00,000-3,50,000)/20 37,500
Reversal of depreciation 5,000

Particulars Consolidated Individual Financial statements

financial Airtel Airtel
statements Telecommunications Infrastructures
Ltd. Pvt. Ltd.
31st March 20X1 10,00,000 0 10,00,000
1 st April 20X1 0 11,00,000 (10,00,000)
purchase sale
Depreciation (32,500) (37,500) 0
31st March 20X2 9,67,500 10,62,500 0

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 14.174 FINANCIAL REPORTING

9. Paragraph 25 of Ind AS 110 states that if a parent loses control of a subsidiary, the parent:
(a) derecognises the assets and liabilities of the former subsidiary from the consolidated
balance sheet.
(b) recognises any investment retained in the former subsidiary at its fair value when control
is lost and subsequently accounts for it and for any amounts owed by or to the former
subsidiary in accordance with relevant Ind ASs. That fair value shall be regarded as the
fair value on initial recognition of a financial asset in accordance with Ind AS 109 or, when
appropriate, the cost on initial recognition of an investment in an associate or joint venture.
(c) recognises the gain or loss associated with the loss of control attributable to the former
controlling interest.”
Paragraph B98(c) of Ind AS 110 states that on loss of control over a subsidiary, a parent
shall reclassify to profit or loss, or transfer directly to retained earnings if required by other
Ind AS, the amounts recognised in other comprehensive income in relation to the subsidiary
on the basis specified in paragraph B99.
As per paragraph B99, if a parent loses control of a subsidiary, the parent shall account for
all amounts previously recognised in other comprehensive income in relation to that
subsidiary on the same basis as would be required if the parent had directly disposed of the
related assets or liabilities.
Therefore, if a gain or loss previously recognised in other comprehensive income would be
reclassified to profit or loss on the disposal of the related assets or liabilities, the parent shall
reclassify the gain or loss from equity to profit or loss (as a reclassification adjustment) when
it loses control of the subsidiary. If a revaluation surplus previously recognised in other
comprehensive income would be transferred directly to retained earnings on the disposal of
the asset, the parent shall transfer the revaluation surplus directly to retained earnings when
it loses control of the subsidiary.
In view of the basis in its consolidated financial statements, AB Limited shall:
(a) re-classify the FVOCI reserve in respect of the debt investments of ` 5.4 crore (90% of `
6 crore) attributable to the owners of the parent to the statement of profit or loss in
accordance with paragraph B5.7.1A of Ind AS 109, Financial Instruments which requires
that the cumulative gains or losses previously recognised in OCI shall be recycled to profit
and loss upon derecognition of the related financial asset. This is reflected in the gain on
disposal. Remaining 10% (i.e., ` 0.6 crore) relating to non-controlling interest (NCI) is
included as part of the carrying amount of the non-controlling interest that is derecognised
in calculating the gain or loss on loss of control of the subsidiary;
(b) transfer the reserve relating to the net measurement losses on the defined benefit liability
of ` 2.7 crore (90% of ` 3 crore) attributable to the owners of the parent within equity to
retained earnings. It is not reclassified to profit or loss. The remaining 10% (i.e., ` 0.3
crore) attributable to the NCI is included as part of the carrying amount of NCI that is
derecognised in calculating the gain or loss on loss of control over the subsidiary. No
amount is reclassified to profit or loss, nor is it transferred within equity, in respect of the
10% attributable to the non-controlling interest.

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 CONSOLIDATED FINANCIAL STATEMENTS 14.175

(c) reclassify the cumulative gain on fair valuation of equity investment of ` 3.6 crore (90%
of ` 4 crore) attributable to the owners of the same parent from OCI to retained earnings
under equity as per paragraph B5.7.1 of Ind AS 109, Financial Instruments, which
provides that in case an entity has made an irrevocable election to recognise the changes
in the fair value of an investment in an equity instrument not held for trading in OCI, it may
subsequently transfer the cumulative amount of gains or loss within equity. Remaining
10% (i.e., ` 0.4 crore) related to the NCI are derecognised along with the balance of NCI
and not reclassified to profit and loss.
(d) reclassify the foreign currency translation reserve of ` 7.2 crore (90% × ` 8 crore)
attributable to the owners of the parent to statement of profit or loss as per paragraph 48
of Ind AS 21, The Effects of Changes in Foreign Exchange Rates, which specifies that the
cumulative amount of exchange differences relating to the foreign operation, recognised
in OCI, shall be reclassified from equity to profit or loss on the disposal of foreign
operation. This is reflected in the gain on disposal. Remaining 10% (i.e., ` 0.8 crore)
relating to the NCI is included as part of the carrying amount of the NCI that is
derecognised in calculating the gain or loss on the loss of control of subsidiary, but is not
reclassified to profit or loss in pursuance of paragraph 48B of Ind AS 21, which provides
that the cumulative exchange differences relating to that foreign operation attributed to
NCI shall be derecognised on disposal of the foreign operation, but shall not be
reclassified to profit or loss.
The impact of loss of control over BC Limited on the consolidated financial statements of
AB Limited is summarised below:
(Rupees in crore)
Particular Amount Amount PL RE
(Dr) (Cr) Impact Impact
Gain / Loss on Disposal on
Investments
Bank 56
Non-controlling interest 6
(Derecognised)
Investment at FV (20% Retained) 16
Gain on Disposal (PL) balancing figure 18 18
De-recognition of total net assets of 60
subsidiary
Reclassification of FVTOCI reserve on
debt instruments to profit or loss
FVTOCI reserve on debt instruments 5.4
(6 cr. x 90%)
To Profit and loss 5.4 5.4

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 14.176 FINANCIAL REPORTING

Reclassification of net measurement

loss reserve to profit or loss
Reserve and Surplus 2.7 -2.7
To Net measurement loss reserve 2.7
(FVTOCI) [(3 cr. x 90%)]
Reclassification of FVTOCI reserve on
equity instruments to retained earnings
FVTOCI reserve on equity instruments 3.6
(4 cr.x 90%)
To Reserve and Surplus 3.6 3.6
Foreign currency translation reserve
reclassified to profit or loss
Foreign currency translation reserve 7.2
(FVOCI) [8 cr. x 90%]
To Profit and loss 7.2 7.2
Total 30.6 0.9

© The Institute of Chartered Accountants of India