Consolidation Question Paper

CONSOLIDATED & SEPARATE FINANCIAL STATEMENTS OF GROUP ENTITIES
CONSOLIDATION: SUBSIDIARIES (IND AS 110)
Q. 1. A Ltd. Acquired 10% additional shares of its 70% subsidiary. The following
relevant information is available in respect of the change in non-controlling
interest on the basis of Balance Sheet finalized as on 1.4.20X0:
As on 31.3.20X0
Separate Financial Statements (₹ in thousands)
Investment in subsidiary (70% interest) – at cost 14,000
Purchase price for additional 10% interest 2,600
Consolidated Financial Statements (₹ in thousands)
Non-controlling interests (30%) 6,600
Consolidated profit & loss account balance 2,000
Goodwill 600
The reporting date of the subsidiary and the parent is 31 March 20X0. Prepare
note showing adjustment for change of non-controlling interest. Should
goodwill be adjusted for the change?
[Illustration 23: Page 14.83]
Q. 2. A Ltd. acquired 70% shares of B Ltd. On 1.4.20X0 when the fair value of net
assets of B Ltd. was ₹ 200 lakh. During 20X0-20X1, B Ltd. made profit of ₹
100 lakh. Individual and consolidated balance sheets as on 31.3.20X1 are as
follows:
₹ in lakhs
A B Group
Assets
Goodwill 10
PPE 627 200 827
Financial Assets:
Investments 150
Cash 200 30 230
Other current assets 23 70 93
1,000 300 1,160
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A B Group
Equity and Liabilities
Share capital 200 100 200
Other equity 800 200 870
Non-controlling interest 90
1,000 300 1,160
A Ltd. acquired another 10% stake in B Ltd. On 1.4.20X1 at ₹ 32 lakh. The
proportionate carrying amount of the non-controlling interest is ₹ 30 lakh.
Show the individual and consolidated balance sheet of the group immediately
after the change in non-controlling interest.
[Illustration 24: Page 14.84 to 14.85]
Q. 3. PQR Ltd. is the subsidiary company of MNC Ltd. In the individual financial
statements prepared in accordance with Ind AS, PQR Ltd. has adopted
Straight-line method (SLM) of depreciation and MNC Ltd. has adopted
Written-down value method (WDV) for depreciating its property, plant and
equipment. As per Ind AS 110, Consolidated Financial Statements, a parent
shall prepare consolidated financial statements using uniform accounting
policies for like transactions and other events in similar circumstances.
How will these property, plant and equipment be depreciated in the
consolidated financial statements of MNC Ltd. prepared as per lnd AS?
Q. 4. A Ltd. acquired 70% equity shares of B Ltd. on 1.4.20X1 at cost of ₹ 10,00,000

when B Ltd. had an equity share capital of ₹ 10,00,000 and other equity of ₹
80,000. In the four consecutive years B Ltd. fared badly and suffered losses
of ₹ 2,50,000, ₹ 4,00,000, ₹ 5,00,000 and ₹ 1,20,000 respectively. Thereafter
in 20X5-20X6, B Ltd. experienced turnaround and registered an annual profit
of ₹ 50,000. In the next two years i.e. 20X6-20X7 and 20X7-20X8, B Ltd.
recorded annual profits of ₹ 1,00,000, and ₹ 1,50,000 respectively. Show the
non-controlling interests and goodwill at the end of each year for the purpose
of consolidation. Assume that the assets are at fair value.
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Q. 5. From the following data, determine in each case:

1) Non-controlling interest at the date of acquisition (using proportionate
share method) and at the date of consolidation
2) Goodwill or Gain on bargain purchase.
3) Amount of holding company’s share of profit in the consolidated Balance
Sheet assuming holding company’s own retained earnings to be ₹
2,00,000 in each case
Case Subsidiary % of Cost Date of Acquisition Consolidation date
Company shares 1.04.20X1 31.03.20X2
owned Share Retained Share Retained
Capital Earnings Capital Earnings
[A] [B] [A] [B]
1 A 90% 1,40,000 1,00,000 50,000 1,00,000 70,000
2 B 85% 1,04,000 1,00,000 30,000 1,00,000 20,000
3 C 80% 56,000 50,000 20,000 50,000 20,000
4 D 100% 1,00,000 50,000 40,000 50,000 56,000
The company has adopted an accounting policy to measure Non-controlling
interest at NCI’s proportionate share of the acquiree’s identifiable net assets.
It may be assumed that the fair value of acquiree’s net identifiable assets is
equal to their book values.
[[Illustration 20: Page 14.79 to 14.80]
Q. 6. Given below are the financial statements of P Ltd and Q Ltd as on 31.3.20X1:
Balance Sheets (₹ in lakhs)
P Ltd. Q Ltd.
Assets
Non-current Assets
Property, Plant and Equipment 1,07,000 44,000
Financial Assets:
Non-current Investments 5,000 1,000
Loans 10,000
Current Assets
Inventories 20,000 10,000
Financial Assets:
Trade Receivables 8,000 10,000
Cash and Cash Equivalents 38,000 1,000
Total Assets 1,88,000 66,000
Shareholders’ Funds
Share Capital 20,000 10,000
Other Equity 1,20,000 40,000
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P Ltd. Q Ltd.
Non-current Liabilities
Financial Liabilities
Long-term liabilities 30,000 10,000
Deferred tax liabilities 5,000 1,000
Long-term provisions 5,000 1,000
Current Liabilities
Financial liabilities
Trade Payables 6,000 2,000
Short-term Provisions 2,000 2,000
Total Equity and Liabilities 1,88,000 66,000
Notes to Financial Statements
Reserves & Surplus
General Reserve 1,00,000 30,000
Retained Earnings 20,000 10,000
1,20,000 40,000
Inventories
Raw Material 10,000 5,000
Finished Goods 10,000 5,000
20,000 10,000
On 1.4.20X1, P Ltd. acquired 70% of equity shares (700 lakhs out of 1,000
lakhs shares) of Q Ltd. at ₹ 36,000 lakhs. The company has adopted an
accounting policy to measure non-controlling interest at fair value (quoted
market price) applying Ind AS 103. Accordingly, the company computed full
goodwill on the date of acquisition. Shares of both the companies are of face
value ₹ 10 each. Market price per share of Q Ltd. as on 1.4.20X1 is ₹ 55.
Entire long-term borrowings of Q Ltd. is from P Ltd. The fair value of net
identifiable assets is at ₹ 50,000 lakhs.
Prepare consolidated balance sheet as on 1.4.20X1 as per Ind AS 110.
[Illustration 28 (Modified): Page 14.88 to 14.100]
Q. 7. Continuing from Q. No. 6, the following details are furnished for the year
ending 31.3.20X2:
Statements of Profit and Loss for the year ended 31.3.20X2 (₹ in lakhs)
Notes P Ltd. Q Ltd.
i. Statement of Profit and Loss for the year ended 31.03.20X2
Sales 1 2,00,000 80,000
Other Income 2 3,000 ---
Total Revenue 2,03,000 80,000
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Notes P Ltd. Q Ltd.

Expenses
Raw Material Consumed 3 1,10,000 48,000
Change in inventories finished stock 4 (5,000) (3,000)
Employee Benefit Expenses 30,000 10,000
Finance Costs 5 2,700 1,000
Depreciation 7,000 4,000
Other Expenses 6 10,350 6,040
Total Expenses 1,55,050 66,040
Profit Before Tax 47,950 13,960
Tax Expense:
Current Tax 11 15,000 4,000
Deferred Tax 2,000 1,000
17,000 5,000
Profit after Tax 30,950 8,960
ii. Statement of Other Comprehensive Income
FV gain on investment in subsidiary 8 1,000 ---
FV gain: other non-current investments 8 500 250
1,500 250
* Note: Statement of Other Comprehensive Income shall present ‘items that
will not be reclassified to profit or loss’ and ‘items that will be reclassified to
Profit and Loss’. However, such bifurcations had not been made above.
Statement of Changes in Equity for the year ended 31.3.20X2 (₹ in lakhs)
Share General Profit Fair Total
Capital Reserve & Loss Value
Reserve
P Ltd.
Balance as on 1.4.20X1 20,000 1,00,000 20,000 1,40,000
Dividend for 20X1-20X2 (8,000) (8,000)

Dividend distribution tax (1,350) (1,350)
Dividend received from 1,680 1,680
subsidiary
Profit for year 20X1-20X2 30,950 30,950
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Share General Profit Fair Total

Capital Reserve & Loss Value
Reserve
Fair Value gain on 1,000 1,000
investment in subsidiary
(See Note 7)
Fair Value gain on other 500 500
non-current investments
(See Note 7)
Transfer to reserve 20,000 (20,000)
Balance as on 31.3.20X2 20,000 1,20,000 23,280 1,500 1,64,780
Q Ltd.
Balance as on 1.4.20X1 10,000 30,000 10,000 50,000
Dividend for 20X1-20X2 (2,400) (2,400)

Dividend distribution tax (400) (400)
Profit for year 20X1-20X2 8,960 8,960
Fair Value gain on other 250 250
non-current investments
(See Note 7)
Transfer to reserve 5,000 (5,000)
Balance as on 31.3.20X2 10,000 35,000 11,160 250 56,410
Balance Sheet as at 31.3.20X2:

Particulars Note P Ltd. Q Ltd.
Assets
Non-current Assets
Property, Plant and Equipment 7 1,17,000 45,000
Financial Assets:
Non-current Investments 8 42,500 1,250
Loans 10,000
Current Assets
Financial Assets:
Cash and Cash Equivalents
(See Statement of Cash Flows) 930 4,200
Total Assets 2,15,430 73,450
Shareholders’ Funds
Share Capital 20,000 10,000
Other Equity (See S.O.C.E.) 1,44,780 46,410
1,64,780 56,410
Non-current Liabilities
Borrowings 30,000 10,000
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Particulars Note P Ltd. Q Ltd.

Deferred tax liabilities 7,000 2,000
Long-term provisions 9 4,600 930
41,600 12,930
Current Liabilities
Short-term Provisions 1,050 110
9,050 4,110
Total Liabilities 50,650 17,040
Total Equity and Liabilities 2,15,430 73,450
Statement of Cash Flows for the year ending 31.3.20X2

P Ltd. Q Ltd.
i. Cash Flows from Operating Activities
Profit after Tax 30,950 8,960
Add back:
Current Tax 15,000 4,000
Deferred Tax 2,000 1,000
Depreciation 7,000 4,000
Finance Costs 2,700 1,000
Change in Provisions (1,350) (1,960)
Reversal of Interest Income (1,000) NIL
Working Capital Adjustments:
Inventories (15,000) (5,000)
Trade Receivables (2,000) 2,000
40,300 16,000
Less: Advance Tax (15,000) (4,000)
25,300 12,000
ii. Cash Flows from Investing Activities
Purchase of Property, Plant and Equipment (17,000) (5,000)
Acquisition of subsidiary (36,000) NIL
Interest Income 1,000 NIL
Dividend Income 1,680 NIL
(50,320) (5,000)
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P Ltd. Q Ltd.
iii. Cash Flows from Financing Activities
Dividend Payment (8,000) (2,400)
Dividend distribution tax (1,350) (400)
Interest payment (2,700) (1,000)
(12,050) (3,800)
Net Changes in Cash Flows (i + ii + iii) (37,070) 3,200
Balance of Cash & Cash Equivalents: 1.4.20X1 38,000 1,000
Balance of Cash & Cash Equivalents: 31.3.20X2 930 4,200
Notes: P Ltd. Q Ltd.

Note 1 – Sales
Sales to Q Ltd. 20,000 N.A.
Other Sales 1,80,000 80,000
2,00,000 80,000
Note 2 – Other Income
Interest from Q Ltd. 1,000 N.A.
Royalty from Q Ltd. 2,000 N.A.
3,000
Note 3 – Raw Material Consumed
Opening Stock 10,000 5,000
Purchases from P Ltd. N.A. 20,000
Other Purchases 1,20,000 30,000
Closing Stock 20,000 7,000
1,10,000 48,000
Note 4 – Changes in inventories of finished stock
Opening Stock 10,000 5,000
Closing Stock (15,000) (8,000)
(5,000) (3,000)
Note 5 – Finance Costs
Interest 2,700
Interest to P Ltd. N.A. 1,000
2,700 1,000
Note 6 – Other Expenses
Long-term Provisions 100 30
Short-term Provisions 50 10
Royalty to P Ltd. N.A. 2,000
Others 10,000 4,000
Acquisition Expenses 200 N.A.
10,350 6,040
Note 7 – Property, Plant and Equipment
New Purchases 17,000 5,000
17,000 5,000
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Notes: P Ltd. Q Ltd.

Note 8 – Fair Value of non-current investments
Investments in Subsidiary 37,000
Other Investments 5,500 1,250
42,500 1,250
Fair Value Gain
Investments in Subsidiary 1,000 N.A.
Other Investments 500 250
1,500 250
Note 9 – Long-term Provisions
Balance as on 1.4.20X1 5,000 1,000
Transfer to short term provisions (500) (100)
New Provision 100 30
Balance as on 31.3.20X2 4,600 930
Note 10 – Short-term Provisions
Balance as on 1.4.20X1 2,000 2,000
Transfer from long term provisions 500 100
Payment (1,500) (2,000)
New Provision 50 10
Balance as on 31.3.20X2 1,050 110
Note 11 – Provisions for Tax and Advance Tax
Tax Provision 15,000 4,000
Less: Advance Tax (15,000) (4,000)
NIL NIL
P Ltd. Has decided to account for investment in subsidiary at fair value
through other comprehensive income as per Ind AS 27. Other non-current
investments are classified as financial assets at fair value other
comprehensive income by irrevocable choice as per Ind AS 109. There are no
taxes capital gains.
The group has paid dividend for the year 20X0-20X1 and transferred to
reserve out of profit for 20X1-20X2 as follows:
(₹ in lakhs)
P Ltd. Q Ltd.
Share of NCI Total
Dividend for the year 20X1-20X2
P Ltd.
Dividend 8,000 1,680 720 2,400
Dividend Distribution Tax 1,350 280 120 400
9,350 1,960 840 2,800
Transfer to reserve out of profit for 20X1-20X2 20,000
Trade receivables of P Ltd, include ₹ 3,000 Lakhs due from Q Ltd.
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Based on the above financial statements for the year ended on 31 March,
20X2 and information given, prepare Consolidated Financial Statements.
Q. 8. 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
Bank Overdraft 1,60,000 ---
Trade Payable 94,200 34,800
TOTAL 19,68,600 7,98,800
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 1st October 20X1 was ₹ 4,00,000; The rate of depreciation
on plant & machinery is 10%.
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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
Notes:
i. It may be assumed that the inventory is still unsold on balance sheet
date and the Trade Payables are also not yet settled.
ii. 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.
[Test Your Knowledge Q. No. 5: Page 14.193 to 14.195]
Q. 9. 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
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 Receivables 5,98,000 4,00,000
Cash 1,45,000 80,000
TOTAL 92,43,000 39,94,000
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
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DEF Ltd. XYZ Ltd.

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%.
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
Notes:
i. It may be assumed that the inventory is still unsold on balance sheet
date and the Trade Payables are also not yet settled.
ii. Also assume that the Other Reserves as on 31st March 20X2 are the
same as was on 1st April 20X1.
iii. All fair value adjustments have not yet started impacting consolidated
post-acquisition profits.
Prepare consolidated Balance Sheet as on March 31, 20X2.
Q. 10. 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. balance sheet were:
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Blue Heavens Ltd. Orange County Ltd.

Carrying Amt. Carrying Amt. Fair Value
(₹ in lakhs) (₹ in lakhs) (₹ in lakhs)
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
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.
[Test Your Knowledge Q. No. 6: Page 14.195]
Q. 11. The facts are the same as in Question 10 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.
Q. 12. Facts are same as in Question 10 & 11. 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:
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Carrying Amount Carrying Amount
(₹ in lakhs) (₹ in lakhs)
Assets
Non-current assets
PPE (Building and others) 6,500 2,750
Investment in Orange County Ltd. 4,500 N.A.
11,000 2,750
Current assets
Inventories 800 550
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
Retained earnings 11,000 2,850
16,000 4,850
Current liabilities
Trade payables 350 170
350 170
Total liabilities and equity 16,350 5,020
Statement of Profit and Loss for the year ended 31 March 20X3:
(₹ in lakhs)
Revenue 3,000 1,900
Cost of Sales (1,800) (1,000)
Gross Profit 1,200 900
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
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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.
Q. 13. 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 it 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.
Q. 14. Prepare the consolidated Balance Sheet as on 31st March, 20X2 of a group of
companies comprising P Limited, S Limited and SS Limited. Their balance
sheets on that date are given below:
(₹ in lakhs)
P Ltd. S Ltd. SS Ltd.
ASSETS
Non-current Assets
Property, Plant and Equipment 320 360 300
Investments:
32 lakh shares in S Ltd. 340
24 lakh shares in SS Ltd. 280
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P Ltd. S Ltd. SS Ltd.

Current Assets
Inventories 220 70 50
Financial Assets
Trade Receivables 260 100 220
Bills Receivables 72 --- 30
Cash in hand and at Bank 228 40 40
TOTAL 1,440 850 640
EQUITY AND LIABILITIES
Shareholders’ Equity
Share Capital (₹ 10 per share) 600 400 320
Other Equity
Reserves 180 100 80
Retained Earnings 160 50 60
Current Liabilities
Trade Payables 470 230 180
Bills Payable
P Ltd. --- 70 ---
SS Ltd. 30 --- ---
TOTAL 1,440 850 640
The following additional information is available:
(i) P Ltd. holds 80% shares in S Ltd. And S Ltd. Holds 75% shares in SS
Ltd. Their holdings were acquired on 30th September, 20X1.
(ii) The business activities of all the companies are not seasonal in nature.
Therefore, it can be assumed that profits are earned evenly throughout the year.
(iii) On 1st April, 20X1, the following balances stood in the books of S Ltd.
and SS Ltd. (₹ in lakhs)
S Ltd. SS Ltd.
Reserves 80 60
Retained Earnings 20 30
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(iv) ₹ 10 lakhs included in the inventory figure of S ltd, is inventory which

has been purchased from SS Ltd at cost plus 25%.
(v) The parent company has adopted an accounting policy to measure non-
controlling interest at fair value (quoted market price) applying Ind AS
103. Assume market prices of S Ltd and SS Ltd are the same as
respective face values.
[Illustration 29: Page 14.102 to 14.107 / Similar to Exam Question:
July 2021: Q. No. 1(a) (16 marks)]
Q. 15. A parent owns 60% of a subsidiary. The subsidiary sells some inventory to
the parent for ₹ 35,000 and makes a profit of ₹ 15,000 on the sale. The
inventory is in the parent’s balance sheet at the year end. Examine the
treatment of intra-group transaction and pass the necessary journal entry.
Q. 16. In the above illustration, assume that it is the parent that makes the sale.
The parent owns 60% of a subsidiary. The parent sells some inventory to the
subsidiary for ₹ 35,000 and makes a profit of ₹ 15,000. On the sale the
inventory is in the subsidiary’s balance sheet at the year end. Examine the
treatment of intra-group transaction and pass the necessary journal entry.
Q. 17. A Ltd, a parent company sold goods costing ₹ 200 lakh to its 80% subsidiary
B Ltd. at ₹ 240 lakh. 50% of these goods are lying at its stock. B Ltd. has
measured this inventory at cost i.e. at ₹ 120 lakh. Show necessary adjustment
in the consolidated financial statements (CFS). Assume 30% tax rate.
Q. 18. Ram Ltd., a parent company purchased goods costing ₹ 100 lakh from its 80%
subsidiary Shyam Ltd. at ₹ 120 lakh. 50% of these goods are lying at the
godown. Ram Ltd. has measured this inventory at cost i.e. at ₹ 60 lakh. Show
the necessary adjustment in the consolidated financial statements (CFS).
Assume 30% tax rate.
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Q. 19. A Ltd. (which is involved in the business of selling capital equipment) a parent
company sold a capital equipment costing ₹ 100 lakh to its 80% subsidiary B
Ltd. at ₹ 120 lakh. The capital equipment is recorded as PPE by B Ltd. The
useful life of the PPE on the date of transfer was 10 years. Show the necessary
adjustment in the consolidated financial statements (CFS).
Q. 20. Amla Ltd. purchased a 100% subsidiary for ₹ 10,00,000 at the end of 20X1
when the fair value of the subsidiary Lal Ltd.’s net asset was ₹ 8,00, 000.
The parent sold 40% of its investment in the subsidiary in March 20X4 to
outside investors for ₹ 9,00,000. The parent still maintains a 60% controlling
interest in the subsidiary. The carrying value of the subsidiary’s net assets is
₹ 18,00,000 (including net assets of ₹ 16,00,000 & goodwill of ₹ 2,00,000).
Calculate gain / loss on sale of interest in subsidiary as on 31st March 20X4.
Q. 21. In March 20X1 a group had a 60% interest in subsidiary with share capital of
50,000 ordinary shares. The carrying amount of goodwill is ₹ 20,000 at March
20X1 calculated using the partial goodwill method. On 31 March 20X1, an
option held by the minority shareholders exercised the option to subscribe for
a further 25,000 ordinary shares in the subsidiary at ₹ 12 per share, raising
₹ 3,00,000. The net assets of the subsidiary in the consolidated balance sheet
prior to the option’s exercise were ₹ 4,50,000, excluding goodwill.
Calculate gain or loss on loss of interest in subsidiary due to option exercised
by minority shareholder.
Q. 22. A parent purchased 80% interest in a subsidiary for ₹ 1,60,000 on 1 April

20X1 when the fair value of the subsidiary’s net assets was ₹ 1,75,000.
Goodwill of ₹ 20,000 arose on consolidation under the partial goodwill
method. An impairment of goodwill of ₹ 8,000 was charged in the consolidated
financial statements for year ended 31 March 20X3. No other impairment
charges have been recorded. The parent sold its investment in the subsidiary
18 | P a g e
on 31 March 20X4 for ₹ 2,00,000. The book value of the subsidiary’s net
assets in the consolidated financial statements on the date of the sale was ₹
2,25,000 (not including goodwill of ₹ 12,000). When the subsidiary met the
criteria to be classified as held for sale under Ind AS 105, no write off was
required because the expected fair value less cost to sell (of 100% of the
subsidiary) was greater than the carrying value.
The parent carried the investment in the subsidiary in its separate financial
statements at cost, as permitted by Ind AS 27.
Calculate gain or loss on disposal of subsidiary in parent’s separate and
consolidated financial statements as on 31st March 20X4.
Q. 23. AT Ltd. purchased a 100% subsidiary for ₹ 50,00,000 on 31st March 20X1
when the fair value of the net assets of BT Ltd. was ₹ 40,00,000. Therefore,
goodwill is ₹ 10,00,000. AT Ltd. sold 60% of its investment in BT Ltd. On 31st
March 20X3 for ₹ 67,50,000, leaving AT Ltd. with 40% and significant
influence. At the date of disposal, the carrying value of net assets of BT Ltd.
excluding goodwill is ₹ 80,00,000. Assume the fair value of the investment in
associate BT Ltd. retained is proportionate to the fair value of the 60% sold,
i.e. ₹ 45,00 000.
Calculate gain or loss on sale of proportion of BT Ltd. in AT Ltd.’s separate
and consolidated financial statements as on 31st March 20X3.
Q. 24. The facts of this illustration are same per the above Illustration, except the
group AT Ltd. disposes of a 90% interest for ₹ 85,50,000 leaving AT Ltd. with
a 10% investment. The fair value of the remaining interest is ₹ 9,50,000
(assumed for simplicity to be pro rata to the fair value of the 90% sold).
Calculate gain or loss on sale of proportion of BT Ltd. In AT Ltd.’s separate
and consolidated financial statements as on 31st March 20X3.
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Q. 25. Reliance Ltd. has a number of wholly-owned subsidiaries including Reliance

Jio Infocomm Ltd. at 31st March 20X2.
Particulars Consolidated Group carrying
(₹ in ‘000s) amount of Reliance
Jio Infocomm Ltd.
asset and liabilities
Ltd. (₹ in ‘000)
Assets
Non-current assets
Buildings 1,620 670
Goodwill 190 90
Current assets
Inventories 70 20
Financial assets
Trade receivables 850 450
Cash 1,550 500
Total Assets 4,280 1,730
Equity
Share capital 800
Other equity
Retained earnings 2,130
2,930
Current liabilities
Trade payables 1,350 450
Total Equity and Liabilities 4,280 450
Prepare consolidated Balance Sheet after disposal as on 31st March, 20X2
when Reliance Ltd. group sold 90% shares of Reliance Jio Infocomm Ltd. to
independent party for ₹ 1,000 (‘000s).
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Q. 26. H Limited has a subsidiary, S Limited and an associate, A Limited. The three
companies are engaged in different lines of business.
These companies are using the following cost formulas for their valuation in
accordance with Ind AS 2 ‘Inventories’.
Name of the Company Cost Formula used
H Ltd. FIFO
S Ltd., A Ltd. Weighted average cost
Whether H Limited is required to value inventories of S Limited and A Limited
also using FIFO formula in preparing its consolidated financial statements?
Q. 27. How should assets and liabilities be classified into current or non-current in
consolidated financial statements when parent and subsidiary have different
reporting dates?
Q. 28. A Limited, an Indian Company has a foreign subsidiary, B Inc. Subsidiary B

Inc. has taken a long term loan from a foreign bank, which is repayable after
the year 20X9. However, during the year ended 31st March, 20X2, it breached
one of the conditions of the loan, as a consequence of which the loan became
repayable on demand on the reporting date. Subsequent to year end but
before the approval of the financial statements, B Inc. rectified the breach and
the bank agreed not to demand repayment and to let the loan run for its
remaining period to maturity as per the original loan terms. While preparing
its standalone financial statements as per IFRS, B Inc. has classified this loan
as a current liability in accordance with IAS 1 ‘Presentation of Financial
Statements’.
Whether A Limited is required to classify such loan as current while preparing
its consolidated financial statement under Ind AS?
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Q. 29. XYZ Ltd. purchased 80% shares of ABC Ltd. on 1st April, 20X1 for ₹ 1,40,000.
The issued capital of ABC Ltd., on 1st April, 20X1 was ₹ 1,00,000 and the
balance in the Statement of Profit and Loss was ₹ 60,000.
For the year ending on 31st March, 20X2 ABC Ltd. has earned a profit of ₹
20,000 and later on it declared and paid a dividend of ₹ 30,000.
Assume, the fair value of non-controlling interest is same as the fair value on
a per-share basis of the purchased interest#. All net assets are identifiable net
assets, there are no non-identifiable assets. The fair value of identifiable net
assets is ₹ 1,50,000.
Show by an entry how the dividend should be recorded in the books of XYZ
Ltd. whenever it is received after approval in the ensuing annual general
meeting.
What is the amount of non-controlling interest as on 1st April, 20X1 (using
Fair value Method) and 31st March, 20X2? Also pass a journal entry on the
acquisition date.
(#This assumption is only for illustration purpose. However, in practical
scenarios the fair value of NCI will be different than the fair value of the
controlling interest.)
Q. 30. From the facts given in the above question, calculate the amount of non-
controlling interest as on 1st April, 20X1 (Using NCI’s proportionate share
method) and 31st March, 20X2.
Also pass a journal entry on the acquisition date.
Q. 31. The facts are same as in the above illustration except that the fair value of net
identifiable asset is ₹ 1,60,000. Calculate NCI and Pass Journal Entry on the
acquisition date.
Note: Use fair value method for 31st March 20X1.
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Q. 32. The facts are same as in the above illustration except that the fair value of net
identifiable asset is ₹ 1,60,000. Calculate NCI and Pass Journal Entry on the
acquisition date. Use NCI’s proportionate share method for 31st March 20X1.
Q. 33. Entity P sells a 20% interest in a wholly owned subsidiary to outside investors
for ₹ 100 lakh in cash. The carrying value of the subsidiary’s net assets is ₹
300 lakh, including goodwill of ₹ 65 lakh from the subsidiary’s initial
acquisition. Pass journal entries to record the transaction.
Q. 34. Entity A acquired 60% of entity B two years ago for ₹ 6,000. At that time,
entity B’s fair value was ₹ 10,000. Lt had net assets with a fair value of ₹ 6,000
(which is assumed same as book value). Goodwill of ₹ 2,400 was recorded
[being ₹ 6,000 – (60% x ₹ 6,000)]. On 1 October 20X0, entity A acquires a
further 20% interest in entity B, taking its holding to 80%. At that time the
fair value of entity B is ₹ 20,000 and entity A pays ₹ 4,000 for the 20% interest.
At the time of the purchase the fair value of entity B’s net assets is ₹ 12,000
and the carrying amount of the non- controlling interest is ₹ 4,000.
Pass journal entries to record the transaction.
Q. 35. Entity A sells 30% interest in its wholly-owned subsidiary to outside investors
in an arm ‘s length transaction for ₹ 500 crore in cash and retains a 70%
controlling interest in the subsidiary. At the time of the sale, the carrying
value of the subsidiary’s net assets in the consolidated financial statements
of Entity A is ₹ 1,300 crore, additionally, there is a goodwill of ₹ 200 crore that
arose on the subsidiary’s acquisition. Entity A initially accounted for NCI
representing present ownership interests in the subsidiary at fair value and
it recognises subsequent changes in NCI in the subsidiary at NCI’s
proportionate share in aggregate of net identifiable assets and associated
goodwill. How should Entity A account for the transaction?
[Illustration 26: Page 14.86 to Page 14.87]
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Q. 36. A parent company (entity A) has an 80% owned subsidiary (entity B). Entity
B makes an acquisition for cash of a third company (entity C), which it then
wholly owns. Goodwill of ₹ 1,00,000 arises on the acquisition of entity C.
How should that goodwill be reflected in consolidated financial statement of
entity A? Should it be reflected as
(a) 100% of the goodwill with 20% then being allocated to the NCI, or
(b) 80% of the goodwill that arises?
Q. 37. MN Ltd. was holding 80% stake in UV Ltd. Now, MN Ltd. has disposed of the
entire stake in UV Ltd. in two different transactions as follows:
➢ Transaction 1: Sale of 25% stake for a cash consideration of ₹ 2,50,000
➢ Transaction 2: Sale of 55% stake for a cash consideration of ₹ 5,50,000
Both the transactions have happened within a period of one month. In
accordance with the guidance given in Ind AS 110, both the transactions have
to be accounted as a single transaction.
The net assets of UV Ltd. and non-controlling interest on the date of both the
transactions was ₹ 9,00,000 and ₹ 1,80,000 respectively (assuming there were
no earnings between the period of two transactions).
How should MN Ltd. account the transaction?
Q. 38. X Limited was holding 100% of the equity share capital of Y Limited and Y
Limited was treated as a subsidiary by X Limited. Now, Y Limited issues
convertible preference shares to Z Limited. As per the issue document of
convertible preference shares, Z Limited also gets the rights to participate in
the relevant activities of Y Limited whereby Z Limited’s consent is also
necessary to pass any decision by the equity shareholder of Y Limited (i.e. X
Limited). Determine how should X Limited account for its investment in Y
Limited in its consolidated financial statements after the issue of convertible
preference shares by Y Limited to Z Limited?
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Q. 39. P Pvt. Ltd. has a number of wholly-owned subsidiaries including S Pvt. Ltd.
at 31st March 20X2. P Pvt. Ltd.’s consolidated balance sheet and the group
carrying amount of S Pvt. Ltd.’s assets and liabilities (i.e., the amount
included in the consolidated balance sheet in respect of S Pvt. Ltd.’s assets
and liabilities) at 31st March 20X2 are as follows:
Particulars Consolidated Group carrying
(₹ in millions) amount of S Pvt.
Ltd.’s asset and
liabilities Ltd. (₹
in millions)
Assets
Non-current assets
Buildings 3,240 1,340
Goodwill 380 180
Current assets
Inventories 140 40
Financial assets
Trade receivables 1,700 450
Cash 3,100 1,000
Total Assets 8,560 3,460
Equity
Share capital 1,600
Other equity
Retained earnings 4,260
5,860
Current liabilities
Trade payables 2,700 900
Total Equity and Liabilities 8,560 900
Prepare consolidated Balance Sheet after disposal as on 31st March, 20X2
when P Pvt. Ltd. group sold 100% shares of S Pvt. Ltd. to independent party
for ₹ 3,000 (millions).
Q. 40. 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 carry valued at ₹ 60 crore.
25 | P a g e
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 OCI 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.
What would be the accounting treatment on loss of control in the consolidated
financial statements of AB Limited?
Q. 41. What will be the accounting treatment of dividend distribution tax in the
consolidated financial statements in case of partly-owned subsidiary in the
following scenarios:
Scenario 1:
H Limited (holding company) holds 12,000 equity shares in S Limited
(Subsidiary of H Limited) with 60% holding. Accordingly, S Limited is a partly-
owned subsidiary of H Limited. During the year 20X1, S Limited paid a
dividend @ ₹ 10 per share and DDT @ 20% on it.
Should the share of H Limited in DDT paid by S Limited amounting to ₹
24,000 (60% x ₹ 40,000) be charged as expense in the consolidated profit and
loss of H Limited?
Scenario 2 (A):
Extending the situation given in scenario 1, H Limited also pays dividend of ₹
300,000 to its shareholders and DDT liability @ 20% thereon amounts to ₹
60,000. As per the tax laws, DDT paid by S Ltd. of ₹ 24,000 is allowed as set
26 | P a g e
off against the DDT liability of H Ltd., resulting in H Ltd. paying ₹ 36,000 (₹
60,000 – ₹ 24,000) as DDT to tax authorities.
Scenario 2 (B):
If in (A) above, H Limited pays dividend amounting to ₹ 100,000 with DDT
liability @ 20% amounting to ₹ 20,000.
Scenario (3):
Will the answer be different for the treatment of dividend distribution tax paid
by associate in the consolidated financial statement of investor, if as per tax
laws the DDT paid by associate is not allowed set-off against the DDT liability
of the investor?
[November 2019 RTP Q. No. 10]
Q. 42. Gamma Limited, a parent company, is engaged in manufacturing and retail

activities. The group holds investments in different entities as follows:
▪ Gamma Limited holds 100% Investment in G Limited and D Limited;
▪ G Limited and D Limited hold 60% and 40% in GD Limited respectively;
▪ Delta Limited is a 100% subsidiary of GD Limited
Firstly, Gamma Limited wants you to suggest whether GD Limited can avail
the exemption from the preparation and presentation of consolidated financial
statements as per applicable Ind AS?
Secondly, if all other facts remain the same as above except that G Limited
and D Limited are both owned by an Individual (say, Mr. X) instead of Gamma
Limited, then explain whether GD Limited can avail the exemption from the
preparation and presentation of consolidated financial statements.
[May 2020 RTP Q. No. 14]
Q. 43. On 1st April 2017, A Ltd. acquired 80% of the share capital of S Ltd. On
acquisition date the share capital and reserves of S Ltd. stood at ₹ 5,00,000
and ₹ 1,25,000 respectively. A Ltd. paid initial cash consideration of ₹
10,00,000. Additionally, A Ltd. issued 2,00,000 equity shares with a nominal
value of ₹ 1 per share at current market value of ₹ 1.80 per share.
It was also agreed that A Ltd. would pay a further sum of ₹ 5,00,000 after
three years.
27 | P a g e
A Ltd.'s cost of capital is 10%. The appropriate discount factor for ₹ 1 @ 10%
receivable at the end of
1st year: 0.91
2nd year: 0.83
3rd year: 0.75
The shares and deferred consideration have not yet been recorded by A Ltd.
Below are the Balance Sheets of A Ltd. and S Ltd. as at 31st March, 2019:
A Ltd. (₹ ‘000s) S Ltd. (₹ ‘000s)
Non-current assets:
Property, Plant and Equipment 5,500 1,500
Investment in S Ltd. at cost 1,000
Current assets:
Inventory 550 100
Receivables 400 200
Cash 200 50
7,650 1,850
Equity
Share capital 2,000 500
Retained earnings 1,400 300
3,400 800
Non-current liabilities 3,000 400
Current liabilities 1,250 650
7,650 1,850
Further information:
(i) On the date of acquisition, the fair values of S Ltd.'s plant exceeded its
book value by ₹ 2,00,000. The plant had a remaining useful life of five
years at this date;
(ii) The consolidated goodwill has been impaired by ₹ 2,58,000; and
(iii) The A Limited Group, values the non-controlling interest using the fair
value method. At the date of acquisition, the fair value of the 20% non-
controlling interest was ₹ 3,80,000
You are required to prepare the Consolidated Balance Sheet of A Ltd. as at
31st March, 2019.
[Exam Question: January 2021: Q. No. 1(a) (15 marks)]
Q. 44. Parent A holds 100% interest in its Subsidiary B. Parent A had acquired
subsidiary B 10 years back and had decided to account for the acquisition
28 | P a g e
under the purchase method using fair values of the Subsidiary B in its
consolidated financial statements.
During the current year, Parent A decides to merge Subsidiary B with itself.
For the purpose of this proposed merger, what values of Subsidiary B should
be used for accounting under the Ind AS?
[Exam Question: November 2019: Q. No. 6(c) (4 marks)]
Q. 45. Summarised Balance Sheets of PN Ltd. and SR Ltd. as on 31st March, 2018
were given as below
(Amount in ₹)
Particulars PN Ltd. SR Ltd.
Assets
Land & Building 4,68,000 5,61,600
Plant & Machinery 7,48,800 4,21,200
Investment in SR Ltd. 12,48,000 ---
Inventories 3,74,400 1,13,600
Trade Receivables 1,86,500 1,24,800
Cash & Cash Equivalents 45,200 24,900
Total Assets 30,70,900 12,46,100
Equity Share Capital (Shares of ₹ 100 each fully paid) 15,60,000 6,24,000
Other Reserves 9,36,000 3,12,000
Retained Earnings 1,78,400 2,55,800
Trade Payables 1,46,900 34,300
Shor-term Borrowings 2,49,600 20,000
Total Equity & Liabilities 30,70,900 12,46,100
(i) PN Ltd. acquired 70% equity shares of ₹ 100 each of SR Ltd. on 1st
October, 2017.
(ii) The Retained Earnings of SR Ltd. showed a credit balance of ₹ 93,600
on 1st April, 2017 out of which a dividend of 12% was paid on 15th
December, 2017.
(iii) PN Ltd. has credited the dividend received to its Retained Earnings.
29 | P a g e
(iv) Fair value of Plant & Machinery of SR Ltd. as on 1st October, 2017 was
₹ 6,24,000. The rate of depreciation on Plant & Machinery was 10% p.a.
(v) Following are the increases on comparison of Fair Value as per
respective Ind AS with book value as on 1st October, 2017 of SR Ltd.
which are to be considered while consolidating the Balance Sheets:
(a) Land & Buildings ₹ 3,12,000
(b) Inventories ₹ 46,800
(c) Trade Payables ₹ 31,200
(vi) The inventory is still unsold on Balance Sheet date and the Trade
Payables are not yet settled.
(vii) Other Reserves as on 31st March, 2018 are the same as was on 1st
April, 2017.
(viii) The business activities of both the company are not seasonal in nature
and therefore, assume that profits accrue evenly throughout the year
Prepare the Consolidated Balance Sheet as on 31st March, 2018 of the group
of entities PN Ltd. and SR Ltd. as per Ind AS.
[Exam Question: May 2019: Q. No. 2(a) (15 marks)]
Q. 46. The Balance Sheets of Aqua Ltd. and Baqa Ltd. as on the dates of last closing
of accounts are as under:
Aqua Ltd. (₹) Baqa Ltd. (₹)
As on 31.3.20X7 As on 31.12.20X6
Share capital (Eq. Shares of ₹ 10 each) 10,00,000 5,00,000
Accumulated Profits & Reserves 4,50,000 2,05,000
15% ₹ 100 non-convertible debentures --- 3,00,000
Accounts Payable 3,80,000 2,80,000
Other liabilities 2,00,000 40,000
TOTAL 20,30,000 13,25,000
ASSETS
Fixed Assets at Cost 8,45,000 5,26,500
Less: Depreciation (1,95,000) (1,21,500)
6,50,000 4,05,000
30 | P a g e
Aqua Ltd. (₹) Baqa Ltd. (₹)

As on 31.3.20X7 As on 31.12.20X6
Investments:
40,000 shares in Baqa Ltd. 8,00,000 ---
1,000 debentures in Baqa Ltd. 1,50,000 ---
Current Assets:
Inventories 2,00,000 3,50,000
Accounts Receivable 1,50,000 2,65,000
Cash & Bank 80,000 3,05,000
TOTAL 20,30,000 13,25,000
The following information is also available:
(a) On 8th February, 20X7 there was a fire at the factory of Baqa Ltd.,
resulting in inventory worth ₹ 20,000 being destroyed. Baqa received 75
per cent of the loss as insurance.
(b) On 13th March, 20X7, Aqua sold goods costing ₹ 1,50,000 to Baqa at a
mark-up of 20 per cent. Half of these goods were resold to Aqua who in
turn was able to liquidate the entire inventory of such goods before closure
of accounts on 31st March, 2017. As on 31st March, 2017, Baqa’s
accounts payable show ₹ 60,000 due to Aqua on the two transactions.
(c) Aqua acquired the holdings in Baqa on 1st January, 20X5 when the
reserves and accumulated profits of Baqa Ltd. stood at ₹ 75,000.
You are requested to consolidate the accounts of the two companies and
prepare a Consolidated Balance Sheet of Aqua Limited and its subsidiary as
at 31st March, 20X7.
[Old Syllabus Practice Manual Question 5 (Modified): Page 5.127]
Q. 47. Following are the Balance Sheets of A Ltd. and its subsidiary B Ltd. as on 31
March, 20X7:
A Ltd. (₹) B Ltd. (₹)
Assets
Land and Building 17,500 12,500
Plant and Machinery 35,000 19,500
Furniture 6,000 2,500
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A Ltd. (₹) B Ltd. (₹)

Investments:
3,600 shares in B Ltd. at cost 39,000 ---
Cash at Bank 500 6,500
TOTAL 1,46,500 68,000
Capital (Shares of ₹ 10) 1,10,000 40,000
Securities Premium 13,000 ---
General Reserve --- 10,000
Profit and Loss Account 14,000 3,000
TOTAL 1,46,500 68,000
You are required to prepare the Consolidated Balance Sheet, after considering
the following information:
▪ On the date when A Ltd. acquired shares in B Ltd., the latter had a Reserve
of ₹ 2,500 and a credit balance in Profit and Loss Account of ₹ 3,500.
▪ In determining the value of shares of B Ltd., Plant and Machinery which
then stood in the books at ₹ 22,500 was revalued at ₹ 27,000 and
Furniture standing in the books at ₹ 3,000 was revalued at ₹ 1,800. These
new values were not incorporated in the books of B Ltd.
B Ltd. had purchased goods from A Ltd. for ₹ 9,000 in January 20X7 on 100
days credit of which ₹ 7,000 are still in stock. A Ltd. sells to B Ltd. at cost
plus 25 percent.
[Old Syllabus Question (Modified)]
Q. 48. A Ltd. acquired control of B Ltd., C Ltd. and D Ltd. on 31 March, 20X6. The
following were the balance sheets as at 31 March, 20X7. You are required to
prepare the Consolidated Balance Sheet of A Ltd. and its subsidiaries as at
31 March, 20X7 in accordance with Ind AS 110.
32 | P a g e
A Ltd. (₹) B Ltd. (₹) C Ltd. (₹) D Ltd. (₹)

Assets
Plant & Machinery --- 6,00,000 3,00,000 4,00,000
(Less: Depreciation)
Investment at Cost:
7,000 shares in B Ltd. 10,50,000 --- --- ---
2,500 shares in C Ltd. 3,70,000 --- --- ---
3,000 shares in D Ltd. 3,50,000 --- --- ---
Loan to B Ltd. 1,50,000 --- --- ---
Loan to D Ltd. 1,00,000 --- --- ---
Bank Balance 1,00,000 2,00,000 13,000 70,000
Inventories 30,000 5,00,000 1,00,000 70,000
Trade Receivables 50,000 90,000 77,000 55,000
TOTAL 22,00,000 13,90,000 4,90,000 5,95,000
Share Capital:
Equity Shares: ₹ 100 each 20,00,000 10,00,000 4,00,000 4,00,000
Profit & Loss A/c. 1,50,000 2,00,000 60,000 75,000
Loan from A Ltd. --- 1,50,000 --- 1,00,000
Trade Payables 50,000 40,000 30,000 20,000
TOTAL 22,00,000 13,90,000 4,90,000 5,95,000
The balances in the Profit and Loss A/c. are made up as under:
A Ltd. (₹) B Ltd. (₹) C Ltd. (₹) D Ltd. (₹)
Balance on 31.3.20X6 1,00,000 1,50,000 10,000 30,000
Profit for the year ending
31.3.20X7 2,50,000 3,00,000 1,50,000 45,000
3,50,000 4,50,000 1,60,000 75,000
Less: Dividend Paid 2,00,000 2,50,000 1,00,000 ---
Balance on 31.3.20X7 1,50,000 2,00,000 60,000 75,000
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Q. 49. A Ltd. purchased shares of B Ltd. and C Ltd. on 1.4.20X6 and 1.10.20X6
respectively. The balance sheets of all these companies as at 31 March, 20X7
are given below:
Particulars A Ltd. (₹) B Ltd. (₹) C Ltd. (₹)
Assets
Property, Plant and Equipment 40,000 42,000 65,000
5,000 Equity Shares in B Ltd. 70,000 --- ---
2,000 Preference Shares in B Ltd. 25,000 --- ---
8,000 Equity Shares in C Ltd. 84,000 --- ---
Loan to B Ltd. 4,000 --- ---
Inventories 30,000 25,000 28,000
Trade Receivables 21,000 30,000 20,000
Bills Receivable from C Ltd. 2,000 --- ---
Cash at Bank 9,000 45,000 37,000
TOTAL 2,85,000 1,42,000 1,50,000
Equity Shares of ₹ 10 each 2,00,000 80,000 1,20,000
8% Redeemable Preference Shares --- 30,000 ---
of ₹ 10 each
General Reserve 10,000 --- 4,000
Profit & Loss A/c.:
Balance on 1.4.20X6 20,000 10,000 ---
Current Year’s Profit 15,000 8,000 16,000
Trade Payables 40,000 10,000 6,000
Loan from A Ltd. --- 4,000 ---
Bills Payable --- --- 4,000
TOTAL 2,85,000 1,42,000 1,50,000
Further information:
(a) The stock of C Ltd. includes goods purchased in January, 20X7 from A
Ltd. for ₹ 2,600. The cost of the same to A Ltd. was ₹ 2,000 and credit for
profit was taken by A Ltd.
(b) B Ltd. held at 31 March, 20X7, stock of ₹ 5,000 purchased from A Ltd. A
Ltd. invoiced the goods at cost plus 25%.
34 | P a g e
(c) The loan to B Ltd. was made on 1 July, 20X6 and carried interest of 6%
p.a. Neither was any interest paid nor any provision was made for the
same. A separate provision should be made for the same before
consolidation.
You are required to prepare the Consolidated Balance Sheet of A Ltd. and its
subsidiaries for the year ending 31 March, 20X7 as per Ind AS 110.
Q. 50. Following are the balance sheets of H Ltd. and S Ltd. as on 31 March, 20X7:
Liabilities H Ltd. S Ltd. Assets H Ltd. S Ltd.
Shares of ₹ 10,00,000 5,00,000 Fixed 4,80,000 2,50,000
100 each Assets
General 1,00,000 1,50,000 Investment 5,00,000 ---
Reserve in S Ltd.
Profit & 1,60,000 1,50,000 Current 7,20,000 7,50,000
Loss A/c. Assets
Current 4,40,000 2,00,000
Liabilities
TOTAL 17,00,000 10,00,000 TOTAL 17,00,000 10,00,000
The following further information is furnished:
(a) H ltd. acquired 3,000 shares in S Ltd. on 1.7.20X6. The Reserves and
Surplus position of S Ltd. as on 1.4.20X6 was as under:
(i) General Reserve: ₹ 2,50,000
(ii) Profit & Loss A/c.: ₹ 1,20,000
(b) On 1.10.20X6, S Ltd. issued 1 share for every 4 shares held as Bonus
Share at a face value of ₹ 100 per share. No entry has been made in the
books of H Ltd. for the receipt of these bonus shares.
(c) On 30.9.20X6, S Ltd. declared a dividend out of its pre-acquisition profits
of 25% on its then share capital. H Ltd. credited the dividend to its Profit
& Loss Account.
(d) H Ltd. transferred machinery to S Ltd. for ₹ 1,00,000. The book value of
the machinery to H Ltd. was ₹ 80,000.
Prepare a Consolidated Balance of H Ltd. and its subsidiary as on 31.3.20X7
in accordance with Ind AS 110.
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Q. 51. Given below are the balance sheets of a group of companies comprising LX
Ltd., MX Ltd. and NX Ltd. as on 31 March, 2021:
(₹ in lakhs)
LX Ltd. MX Ltd. NX Ltd.
ASSETS
Non-current Assets
Property, Plant and Equipment 1,500 1,600 1,400
Investments:
17.0 lakh shares in MX Ltd. 2,620 --- ---
9.6 lakh shares in NX Ltd. --- 1,350 ---
Current Assets
Inventories 1,230 730 1,180
Financial Assets
Trade Receivables 1,415 270 620
Bills Receivables 650 60 ---
Cash in hand and at Bank 1,085 90 150
TOTAL 8,500 4,100 3,350
Shareholders’ Equity
Share Capital (₹ 10 per share) 3,400 2,000 1,600
Other Equity
Reserves 1,150 810 580
Retained Earnings 1,030 600 310
Current Liabilities
Trade Payables 2,920 690 805
Bills Payable
MX Ltd. --- --- 55
TOTAL 8,500 4,100 3,350
The following additional information is available:
(i) LX Ltd. holds 85% shares in MX Ltd., which were acquired on 1st April,
2020 and MX Ltd. holds 60% shares in LX Ltd which were acquired on
30th September, 2020.
36 | P a g e
(ii) The following balances stood in the books of MX Ltd. and NX Ltd. as on
1st April, 2020: (₹ in lakhs)
MX Ltd. NX Ltd.
Reserves 760 520
Retained Earnings 480 150
(iii) The business activities of NX Ltd. are not seasonal in nature.

(iv) The parent company has adopted an accounting policy to measure non-
controlling interest at fair value (quoted market price) applying Ind AS
103. The given market price of MX Ltd. is ₹ 120 per share and NX Ltd.
is ₹ 125 per share.
Prepare the consolidated Balance Sheet as on 31st March, 2021 of the group
of companies LX Ltd., MX Ltd. and NX Ltd.
[Exam Question: July 2021: Q. No. 1(a) (16 marks)]
37 | P a g e
EXCEPTION TO PREPARE CONSOLIDATED FINANCIAL STATEMENTS
Q. 52. Scenario A:
Following is the structure of a group headed by Company X:
Company X
100%
Company A
100% 100%
Company B Company C
Company X is a listed entity in India and prepares consolidated financial

statements as per the requirements of Ind AS. Company A is an unlisted entity
and it is not in the process of listing any of its instruments in public market.
Company X does not object to Company A not preparing
consolidated financial statements. Whether Company A is required to prepare
consolidated financial statements as per the requirements of Ind AS 110?
Scenario B:
Assume the same facts as per Scenario A except, Company X is a foreign
entity and is listed in stock exchange of a foreign country and it prepares its
financial statements as per the generally accepted accounting principles
(GAAP) applicable to that country. Will your answer be different in this case?
Scenario C:
Assume the same facts as per Scenario A except, 100% of the investment in
Company A is held by Mr. X (an individual) instead of Company X. Will your
answer be different in this case?
38 | P a g e
Q. 53. Scenario A:
Following is the structure of a group headed by Company A:
Company A
100% 60%
Company B Company C
100%
Company X
Company A is a listed entity in India and prepares consolidated financial

statements as per the requirements of Ind AS. Company C is an unlisted
entity and it is not in the process of listing any of its instruments in public
market. 60% of the equity share capital of Company C is held by Company A
and balance 40% equity share capital is held by other outside investors.
Company A does not object to Company C not preparing consolidated
financial statements. Whether Company C is required to prepare consolidated
financial statements as per the requirements of Ind AS 110?
Scenario B:
Assume the same facts as per Scenario A except, the balance 40% of the
equity share capital of Company C is held by Company B.
State whether C Limited is required to inform its other owner B Limited
(owning 40%) of its intention to not prepare consolidated financial
statements as mentioned in paragraph 4(a)(i)?
39 | P a g e
INVESTMENT ENTITIES
Q. 54. An asset manager has set up and investment fund for the purpose of acquiring
capital contributions from various investors (by issuing them units in the
fund) and investing those contributions in the equity share capital of various
entities for the purpose of earning capital appreciation on those investments.
Following is the existing structure of the fund.
Various Investors
Investment Fund
Strategic Advisory
Services and
financial support
Investment in equity
shares of various
entities
Apart from the investments in various entities, the investment fund also
provides its investee the strategic advisory services so that it can result in
increase in the capital appreciation from investments in those investees. It
also provides its investees financial support in the form of loan to provide
them with funds for acquiring capital assets. The investment fund does not
hold such investments for a period longer than 5 years. The investment fund
measures and evaluate the performance of the investments on fair value
basis.
Whether the investment fund can be treated as an investment entity?
Q. 55. ABC Ltd. Is established with primary objective of investing in the equity
shares of various entities across various industries based on the detailed
research about each industry and entities within that industry being done by
the investment manager of the company.
40 | P a g e
The investment manager decides the timing as to when the investments

should be made considering the current market situation. Sometimes, the
investment manager decides to invest the idle funds into short-term to
medium-term debt instruments with fixed maturity. The exit strategies are in
place for the investments done in equity shares but the same is not there for
investments done in debt instruments.
Determine whether the entity fulfils the exit strategy condition of being
classified as investment entity?
Q. 56. PQR Ltd. Is established with primary objective of investing in the equity shares
of various pharmaceutical companies which are involved in the research and
development of medicine for a critical illness. DEF Ltd. is a follow subsidiary
of PQR Ltd. and DEF Ltd. has entered into contractual arrangements with all
the investees of PQR Ltd. that in case they are successful in developing the
medicine then they will transfer the patent and distribution rights for that
medicine to DEF Ltd. at less than the market price. This arrangement is
explained in the following diagram:
Fellow
subsidiaries
PQR Ltd. DEF Ltd.
Contractual
arrangements
Investment in equity shares

of pharmaceutical
companies
Determine whether PQR Ltd. Can be classified as investment entity?

Q. 57. HTF Ltd. Was formed by T Ltd. to invest in technology start-up companies for
capital appreciation. T Ltd. holds a 70 percent interest in HTF Ltd. and
41 | P a g e
controls HTF Ltd. The other 30 percent ownership interest in HTF Ltd. is
owned by 10 unrelated investors. T Ltd. holds options to acquire investments
held by HTF Ltd., at their fair value, which would be exercised if the
technology developed by the investees would benefit the operations of T Ltd.
No plans for exiting the investments have been identified by HTF Ltd. HTF
Ltd. is managed by an investment adviser that acts as agent for the investors
in HTF Ltd.
Determine whether HTF Ltd. is an investment entity or not.
Q. 58. A Limited ceased to be in investment entity from 1st April 20X1 on which date
it was holding 80% of B Limited. The carrying value of such investment in B
Limited (which was measured at fair value through profit or loss) was ₹
4,00,000. The fair value of non-controlling interest on the date of change in
status was ₹ 1,00,000. The value of subsidiary's identifiable net assets as per
Ind AS 103 was ₹ 4,50,000 on the date of change in status. Determine the
value of goodwill and pass the journal entry on the date of change in status
of investment entity. (Assume that non-controlling interest is measured at fair
value method)
Q. 59. CD Ltd. purchased a 100% subsidiary for ₹ 20,00,000 on 31st March 20X1
when the fair value of the net assets of KL Ltd. was ₹ 16,00,000. Therefore,
goodwill was ₹ 4,00,000. CD Ltd. becomes an investment entity on 31st March
20X3 when the carrying value of its investment in KL Ltd. (measured at fair
value through profit or loss) was ₹ 25,00,000. At the date of change in status,
the carrying value of net assets of KL Ltd. excluding goodwill was ₹ 19,00,000.
Calculate gain or loss with respect to investment in KL Ltd. on the date of
change in investment entity status of CD Ltd.
42 | P a g e

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CONSOLIDATED & SEPARATE FINANCIAL STATEMENTS OF GROUP ENTITIES

CONSOLIDATION: SUBSIDIARIES (IND AS 110)

Q. 4. A Ltd. acquired 70% equity shares of B Ltd. on 1.4.20X1 at cost of ₹ 10,00,000

Q. 5. From the following data, determine in each case:

Notes P Ltd. Q Ltd.

Dividend for 20X1-20X2 (8,000) (8,000)

Profit for year 20X1-20X2 30,950 30,950

Share General Profit Fair Total

Dividend for 20X1-20X2 (2,400) (2,400)

Balance Sheet as at 31.3.20X2:

Particulars Note P Ltd. Q Ltd.

Statement of Cash Flows for the year ending 31.3.20X2

Notes: P Ltd. Q Ltd.

Notes: P Ltd. Q Ltd.

DEF Ltd. XYZ Ltd.

Blue Heavens Ltd. Orange County Ltd.

Blue Heavens Ltd. Orange County Ltd.

buildings have an estimated remaining useful life of 20 years from 31 March

Q. 13. Airtel Telecommunications Ltd. owns 100% share capital of Airtel

P Ltd. S Ltd. SS Ltd.

(iv) ₹ 10 lakhs included in the inventory figure of S ltd, is inventory which

Q. 22. A parent purchased 80% interest in a subsidiary for ₹ 1,60,000 on 1 April

Q. 25. Reliance Ltd. has a number of wholly-owned subsidiaries including Reliance

Q. 28. A Limited, an Indian Company has a foreign subsidiary, B Inc. Subsidiary B

These net assets include the following:

Q. 42. Gamma Limited, a parent company, is engaged in manufacturing and retail

Aqua Ltd. (₹) Baqa Ltd. (₹)

A Ltd. (₹) B Ltd. (₹)

A Ltd. (₹) B Ltd. (₹) C Ltd. (₹) D Ltd. (₹)

(iii) The business activities of NX Ltd. are not seasonal in nature.

EXCEPTION TO PREPARE CONSOLIDATED FINANCIAL STATEMENTS

Company X is a listed entity in India and prepares consolidated financial

Company A is a listed entity in India and prepares consolidated financial

The investment manager decides the timing as to when the investments

Investment in equity shares

Determine whether PQR Ltd. Can be classified as investment entity?

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