Zenith Ltd. prepares consolidated financial statements for the year ended 31 March 2027.

During the audit, the following matters are identified:

Zenith acquired 75% of Alpha Ltd. several years ago. The resulting goodwill is being considered while preparing the CFS for 2026-27.
During 2026-27, Zenith acquired an additional 10% interest in Alpha Ltd., resulting in a change in the relevant consolidation adjustment.
Alpha Ltd. sold an item of machinery to another subsidiary at a profit of ₹30 lakh during 2026-27. The machinery remains within the group at year-end.
Beta Ltd. follows a different accounting policy from Zenith for a particular class of assets, and an adjustment is required to harmonise the accounting policies for consolidation.
Zenith received management fees from Gamma Ltd., another subsidiary, during 2026-27.

The audit senior classifies the matters as follows:

“Items 1 and 2 are permanent consolidation adjustments, whereas Items 3, 4 and 5 are current-period consolidation adjustments.”

The engagement partner disagrees and states that the classification cannot be made in this manner because at least one of the items classified as a permanent adjustment is actually a current-period adjustment.

Which ONE of the following is the most appropriate conclusion?

A. The audit senior is correct because all adjustments arising from acquisition or change in shareholding are permanent, while all intra-group transactions are current-period adjustments.

B. The partner is correct because the adjustment arising from the additional acquisition of shares during the current year is necessarily a current-period consolidation adjustment.

C. The audit senior is correct because goodwill and changes arising from subsequent acquisition of shares are permanent consolidation adjustments, whereas intra-group transactions and harmonisation of accounting policies are current-period adjustments.

D. The partner is correct because goodwill is a current-period consolidation adjustment whenever the subsidiary continues to be consolidated in the current year’s consolidated financial statements.