Methods of consolidating subsidiaries
As per AS 21, Consolidated Financial Statement (CFS) is required to be prepared only for a 'group' of enterprises under the control of a parent. R 723 (E) dated October 14, 2014 and introduced the Companies (Accounts) Amendment Rules, 2014.
As per the scope of AS-23 and AS-27 the application of equity method/proportionate method for consolidation of accounts of associate/ joint ventures respectively is required only when a company prepares consolidation under AS 21 The term ‘group’ has been defined in AS 21 as follows: The explanation to Section 129 (3) clearly states that for the purposes of this sub-section, the word “subsidiary” shall include associate company and joint venture Therefore, as per Section 129 of the Act, 2013 read with rules thereof, consolidation of financial statement is required in case a company is having subsidiary or associate or joint-venture company. As per the rule the consolidation requirement was exempted for a company not having subsidiaries but having associates or joint ventures (‘JVs’).
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Please note here that in the above statements of financial position, .
- Earlier only listed companies was required to do consolidation as listing agreement required the same but with companies act 2013, sec 129 has defines financial statement to include CFS.
Consolidation requirement under Companies Act, 2013 (‘Act, 2013’) Section 129 (3) read with Rule 6 of the Companies (Accounts) Rules, 2014 (Rules) provides manner of consolidation of financial statements of subsidiaries pursuant to Schedule III of the Act, 2013 and the applicable Accounting Standards.
Organizing Your Information Setting Up a Worksheet Combining Financial Statements Eliminating Duplicate Values Community Q&A Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.
After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.