ABC Ltd. is a long-standing customer of XYZ Ltd. Mrs. P whose husband is a director in XYZ Ltd. purchased a controlling interest in entity ABC Ltd.…
CA Final · Financial Reporting · MTP · January 2026
ABC Ltd. is a long-standing customer of XYZ Ltd. Mrs. P whose husband is a director in XYZ Ltd. purchased a controlling interest in entity ABC Ltd. on 1st June, 20X1. Sales of products from XYZ Ltd. to ABC Ltd. in the two-month period from 1st April 20X1 to 31st May 20X1 totalled - 8,00,000. Following the share purchase by Mrs. P, XYZ Ltd. began to supply the products at a discount of 20% to their normal selling price and allowed ABC Ltd. three months' credit (previously ABC Ltd. was only allowed one month's credit, XYZ Ltd.'s normal credit policy). Sales of products from XYZ Ltd. to ABC Ltd. in the ten-month period from 1st June 20X1 to 31st March 20X2 totalled - 60,00,000. On 31st March 20X2, the trade receivables of XYZ Ltd. included - 18,00,000 in respect of amounts owing by ABC Ltd. Analyse and show (where possible by quantifying amounts) how the above event would be reported in the financial statements of XYZ Ltd. for the year ended 31st March 20X2 as per Ind AS. You are required to mention the disclosure requirements as well.
Suggested Answer and Working Notes:
XYZ Ltd. would include the total revenue of 68,00,000 (₹ 60,00,000 +8,00,000) from ABC Ltd. received / receivable in the year ended 31st March 20X2 within its revenue and show - 18,00,000 within trade receivables at 31st March 20X2. Mrs. P would be regarded as a related party of XYZ Ltd. because she is a close family member of one of the key management personnel of XYZ Ltd. From 1st June 20X1, ABC Ltd. would also be regarded as a related party of XYZ Ltd. because from that date ABC Ltd. is an entity controlled by another related party. Because ABC Ltd. is a related party with whom XYZ Ltd. has transactions, then XYZ Ltd. should disclose: The nature of the related party relationship.The revenue of 60,00,000 from ABC Ltd. since 1st June 20X1.The outstanding balance of 18,00,000 at 31st March 20X2. In the current circumstances it may well be necessary for XYZ Ltd. to also disclose the favourable terms under which the transactions are carried out.
Topics: Ind AS 24, Ind AS 8, Ind AS 108
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