Page 50 - Corporate_Professional_Today

ind-AS PrACTiCe PoinTS: ConSolidATion exCePTion

company to exercise judgment in the process 4.8 Valuation of Investments - Assets in the
of applying accounting policies. Consolidation investment portfolio may be valued on market
accounting with investment entity’s exception approach basis or a discounted cash flow
is an accounting area where a higher degree basis, which requires assumptions to be made
of judgment may need to be applied. regarding future cash flows and the discount
4.4 Making the assessment - Entities that rate to be applied to these cash flows. It
meet the definition of an investment entity is pertinent to note that IND-AS 113 - Fair
per IND-AS 110 are required to measure Value Measurement defines fair value as “The
their subsidiaries at FVTPL rather than by price that would be received to sell an asset
line-by-line consolidation accounting, unless or paid to transfer a liability in an orderly
they provide investment-related services to transaction between market participants at
the Company. the measurement date”.
To determine that the Company meets the
definition of an investment entity, it is
required to satisfy the following three criteria
highlighted in the info-graphic hereinbelow.
In the above determination management needs
to consider the following:
u Its stated strategy,
u Its business model,
u Investor profiling,
u Performance management models.
4.5 Fair value measurement - A company
may use the fair value method to represent
its performance in its communication to the
market, including investor presentations. It
may report fair value information internally
to Directors, who use fair value as the
primary measurement attribute to evaluate
performance.
4.6 Provision of investment related services
by subsidiaries
Management is also required to assess whether
subsidiary entities provide investment-related
services to conclude whether they should not
be consolidated and that they should be held
at fair value through profit or loss. lll
4.7 Frequency of assessment - The assessment
needs to be carried out at the time of first-
time adoption as well as on an annual basis.

157
January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 51