Till April 1, 2009, Honk Limited and Ferry Limited were associate companies, Honk holding only 5% shares in Ferry. On March 31, 2010, Honk’s stake in Ferry increased to 25% and the following was the balance sheet of both the companies on this date:

On October 1, 2010, the total holding of Honk Limited became 1,800 equity shares of ₹10 each of Ferry Limited at a total investment value of ₹ 25,500. The balance sheet of both the companies on March 31, 2011 is as follows:

Out of the debtors and bills receivables of Honk Limited, ₹7,500 and ₹2,400, respectively, represent due from Ferry Limited. Balance of general reserve of Ferry Limited is as on April 1, 2010 and P & L a/c of Ferry Limited includes current year’s profit of ₹6,750. On the date of acquisition, the fair value of assets of Ferry Limited was as follows:

(i) Land and building ₹40,000 

(ii) Plant and machinery ₹22,000

 (iii) Bills receivable from outside debtors amounting to ₹500 are irrecoverable.

Discussion Question

(i) How will Honk show the investment as at March 31, 2010?

(ii) Prepare the consolidated financial statement as per the provision of Indian GAAP regarding presentation of consolidated financial statements.

(iii) Prepare the consolidated financial statement as per provision of IFRS regarding presentation of consolidated financial statements.

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Liabilities Equity shares of face value * 10 each General reserve P & La/c Creditors Bills payable Balance Sheet as on March 31, 2010 Honk 1,50,000 83,000 39,000 44,000 22,000 3,38,000 Ferry Assets 30,000 Land and building Plant and machinery 15,000 Stock 12,750 1,07,550 Debtors 20,800 Investment 19,000 Bills receivables Bank Cash (Rupees in crore) Ferry Honk 1,25,000 85,000 50,000 48,000 5,000 3,000 9,000 13,000 3,38,000 35,500 25,000 6,000 28,250 4,500 7,500 800 1,07,550