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Under Ind AS 109, an entity has "retained CONTROL" of a transferred financial asset (per the control test) when:
AThe transferee is a related party of the transferor
BThe transferee is a special-purpose entity created by the transferor
CThe transferor retains legal title to the financial asset
DThe transferee does NOT have the practical ability to sell the asset in its entirety to an unrelated third party unilaterally and without imposing additional restrictions
Answer & Solution
Correct answer: D. The transferee does NOT have the practical ability to sell the asset in its entirety to an unrelated third party unilaterally and without imposing additional restrictions
Para 3.2.9 — the control test is about the TRANSFEREE'S PRACTICAL ABILITY to sell the asset onward in its entirety, unilaterally and without imposing additional restrictions. If the transferee has that practical ability, the transferor has NOT retained control. Related-party status, SPV use, and legal-title retention are not the test. If the transferor retains control AND retains/transfers some but not all risks and rewards, the transferred asset is recognised to the extent of continuing involvement.
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