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I OPINION
EAC Clarifies Accounting Treatment of Investment in Erstwhile Associate under Ind AS
The Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) has issued an opinion addressing the accounting treatment of an investment in an erstwhile associate company under the Ind AS framework, following a query from a listed company transitioning to Ind AS.
Background:
The company had held shares in an associate (X Ltd.) since the 1970s. Due to financial distress, X Ltd. was referred to BIFR in 1998-99, and the investing company provided for 100% of its investment. Upon Ind AS transition in FY 2016-17, the investment was carried at a notional value of ₹1, using this as deemed cost under Ind AS 101.
In FY 2021-22, following a rights issue in which the investor did not participate, its holding dropped to 19%, and X Ltd. ceased to be an associate. Subsequently, in FY 2023-24, with the financial turnaround of X Ltd., the company proposed revaluation of the investment to fair value (~₹40–50 crore) through Other Comprehensive Income (OCI).
Key Question:
Can the company now measure its investme
