The following information is provided for the year ended 31st March, 2024: (i) AX Limited holds 70% shares of BX Limited (ii) BX Limited holds 30%…
CA Intermediate · Advanced Accounting · PYQS · January 2025
The following information is provided for the year ended 31st March, 2024: (i) AX Limited holds 70% shares of BX Limited (ii) BX Limited holds 30% shares of CX Limited (iii) DX Limited holds 40% shares of in CX Limited (iv) DX Limited holds 49% shares in EX Limited You are required to: (i) Identity the related parties for the reporting entities – AX Limited, CX Limited and EX Limited. (ii) If DX Limited would have sold its investment in EX Limited on 1st October, 2023, but goods were continued to be supplied by DX Limited to EX Limited throughout the year, will this scenario change your answer with respect to any of the reporting entity mentioned in point (i)? Give reasons for your answer as per AS 18.
Suggested Answer and Working Notes:
(i) Reporting entity Related party AX Limited BX Limited (AX Limited controls BX Limited directly as holding company CX Limited (AX Limited has significant influence in CX Limited indirectly through BX Limited) CX Limited AX Limited (AX Limited has significant influence in CX Limited indirectly through BX Limited) BX Limited (BX Limited has significant influence in CX Limited) DX Limited (DX Limited holds 40% shares, means substantial interest of more than or equal to 20%, hence significant influence exists in this case) EX Limited DX Limited (DX Limited holds 49% shares, means substantial interest of more than or equal to 20%, hence significant influence exists in this case) (ii) No, DX would still be a related party of EX Limited EX Limited will report DX Limited as a related party as per AS 18. However, the transaction for the period in which the related party relationship exists will only be disclosed.
Topics: AS 18, Framework for preparation and presentation of financial statements
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