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XYZ Ltd. supplied goods worth ₹8 lakhs to ABC Ltd. between 1 April and 31 May 20X1. On 1 June 20X1, Mrs. P (wife of XYZ's director) acquired a controlling stake in ABC Ltd. Between 1 June 20X1 and 31 March 20X2, XYZ supplied a further ₹60 lakhs at favourable terms; ₹18 lakhs was outstanding from ABC at year-end. In XYZ's financial statements for the year ended 31 March 20X2, the related-party revenue disclosure should be:
ANil, because Mrs. P (not the director herself) acquired the stake
B₹60 lakhs, being revenue from the period during which the related-party relationship existed
C₹8 lakhs, being revenue during the period before the relationship arose
D₹68 lakhs, the entire year's revenue from ABC Ltd.
Answer & Solution
Correct answer: B. ₹60 lakhs, being revenue from the period during which the related-party relationship existed
Related-party disclosures cover only the period during which the relationship existed. ABC became related to XYZ on 1 June 20X1 (when Mrs. P, a close family member of XYZ's KMP, acquired control). Only the ₹60 lakhs from that date is disclosed as related-party revenue; the ₹8 lakhs from April–May is included in total revenue but is not a related-party transaction.
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