Page 258 - CA Final PARAM Digital Book.

IND-AS 110 gives exemptions in folowing cases

(i) Investment entities
(ii) Intermediary Subsidiaries(provided all conditions are satisfied)
(iii) Employee benefit plans covered under IND-AS 19

If the question is silent about whether the answer should be as per AS or IND AS ,it is advisable that answer
should be provided per both .
3. The answer provided above is with reference to Investment company, for which exempotion given
under Ind AS.

Exemption from Consolidation for Intermediate Subsidiary & Old Course – (N20E)
QNO Give 2 Reasons of Exclusion (Exemption)
436.400
TITANIUM CNO— GA.180
JRS Limited holds the majority ownership of R Ltd. & K Ltd. S Ltd. is an intermediate subsidiary of JRS
Limited in Surat. The JRS Limited presents the consolidated financial statements for audit purposes to
MMT & Co. As a statutory auditor MMT & Co. obtain a listing of all the components and verify that all
the components included in financial statements unless any component meet criterion for exclusion.
Explain any two reasons which are considered by MMT & Co. for exclusion of components from the
consolidated financial statements and reporting of reasons of exclusion thereof.

Answer Where a component is excluded from the consolidated financial statements, the auditor should
examine the reasons for exclusion and whether such exclusion is in conformity with the applicable
financial reporting framework.

(i) Under Companies (Accounting Standards) Rules, 2006, there could be two reasons for exclusion of
subsidiary, associate or jointly controlled entity- one, that the relationship of parent with the
subsidiary, associate or jointly controlled entity is intended to be temporary or the subsidiary,
associate or joint venture operates under severe long-term restrictions which significantly impair its
ability to transfer funds to the parent.

(ii) Similarly, under the Companies Act, 2013, intermediate subsidiary in India is not required to
present consolidated financial statements. Ind AS 110 also prescribes certain criteria where
consolidated financial statements are not required. In such cases, the auditor should satisfy himself
that the exclusion made by the management falls within these categories, example in the case of an
entity which is excluded from consolidation on the ground that the relationship of parent with the
other entity as subsidiary, associate or joint venture is temporary, the auditor should verify that the
intention of the parent, to dispose off the subsidiary, investment in associate or interest in jointly
controlled entity, in the near future, existed at the time of acquisition of the subsidiary, making
investment in associate or jointly controlled entity.

(iii) The auditor should also verify that the reasons for exclusion are given in the consolidated
financial statements. If an entity is excluded from the consolidated financial statements for reasons
other than those allowed by the applicable financial reporting framework, the auditor should
consider its effect on the auditor’s report to be issued.

QNO Control Over Composition of Board Old Course – (M15E, SM17, PM17, N17R, SM21, M21M)
437.000 TITANIUM CNO— GA.160 New Course – (SM23)
ALFA Ltd. holds the ownership of 10% of voting power and control over the composition of Board of
Directors of GAMA Ltd. While planning the statutory audit of ALFA Ltd., what factors would be
considered by you for audit of financial statements?
Answer ➢ Facts of the Case
In this case, A Ltd. holds only 10 percent of the voting power and control over the composition of

the Board of Directors of B Ltd. In such a case, A Ltd. would be considered as a parent of B Ltd.
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