|
Consolidated
Financial Statements
Objective
Statements
are presented by a parent (holding enterprise ) -
- to
provide financial information about the economic activities
of its group
- to
show economic resources controlled, the obligations
of and results achieved by the group.
Accounting
Standard lays down principles and procedures for preparation
and presentation of consolidated financial statements
AS-21
CONSOLIDATED FINANCIAL STATEMENTS
|
Issuing
Authority:
|
The
Institute of Chartered Accountants of India.
|
| Effective
date : |
Accounting period commencing on or after 1.4.2001 |
|
Applicable
to:
|
An
enterprise that presents consolidated financial
statements.
|
|
Nature:
|
Mandatory
|
Scope
Should
be applied in the preparation and presentation of consolidated
financial statements for a group of enterprises under
the control of a parent.
Should also be applied in accounting for investments
in subsidiaries in a separate financial statements of
a parent.
Does not deal with methods of accounting for amalgamations,
accounting for investments in associates and joint ventures.
Scope
of Consolidated Financial Statements
A
parent which presents consolidated statements should
:
- Present
these statements in addition to its separate financial
statements.
- Consolidate
all subsidiaries, domestic as well as foreign.
- A subsidiary
should be excluded when control is temporary or when
it operates under severe long term restriction.
- Disclose
the reason for not including the subsidiary.
Definitions
- A subsidiary
is an enterprises that is controlled by another enterprise
known as the parent.
- A group
is a parent and its subsidiaries.
- Control
means the ownership of more than half of the voting
power of an enterprise or control of the composition
of BOD so as to obtain economic benefits from its
activities
- Consolidated
Financial Statements are the financial statements
of a group presented as those of a single enterprise.
Consolidated
Financial Statements include
- Consolidated
Balance Sheet.
- Consolidated
P&L Account.
- Notes,
statements and other explanatory material.
- Consolidated
cash flow statement (only if the parent presents its
own Cash Flow Statement)
These are
to be presented in the same format as adopted by the
parent for its separate financial statements.
Consolidated
Procedures
To
be combined on line to line basis.
Cost to the parent of its investment in each subsidiary
and the parent's portion of equity of each subsidiary
to be eliminated, the excess or deficiency to be treated
as Goodwill / Capital Reserve
Intra group balances, intra group transactions and resulting
unrealized profits and losses to be eliminated in full
(unrealized losses should not be eliminated if cost
cannot be recovered)
The financial statements should be drawn up to the same
reporting date. If not practicable, difference should
not be more than six months.
Minority interest in net income of the consolidated
subsidiary to be adjusted against the group income.
Minority interest in net assets to be presented separately
from liabilities and the equity of the parent's shareholders.
If minority's share of loss exceeds the minority interest
in the equity of the subsidiary, such excess is to be
adjusted against majority interest. Subsequently, in
case of profits in future, all such profits are allocated
to the majority interest, unless previous losses absorbed
by the majority are recovered.
Parent's share of profits in subsidiary, should be adjusted
for Preference Dividend, whether declared or not on
Preference Shares of subsidiary held outside the group.
Other
Points
On disposal of subsidiary, the difference
between proceeds from disposal and carrying amount of
net assets is treated as profit / loss on disposal in
consolidated financial statements.
Investment
to be recorded as per AS-13 in individual financial
statement of parent form the date it ceases to be
a subsidiary.
Disclosures
- List
of all subsidiaries including name, country of incorporation,
proportion of ownership interest and voting power
held.
- Nature
of relationship between the parent and a subsidiary,
if the parent does not own more than half of the voting
power of the subsidiary.
- Effect
of the acquisition or disposal of subsidiaries on
the financial position at the reporting date.
- Name
of the subsidiaries of which reporting dates are different
from that of parent's and the difference in reporting
dates.
Accounting
policies used should be disclosed :
- If
it is not practicable to use uniform accounting policies,
the fact together with the proportion of such items
in consolidated financial statements to which different
accounting policies apply should be disclosed.
- If
a member uses different accounting policies, for reasons
other than those stated above, appropriate adjustments
should be made in consolidated financial statements.
Related
existing provisions in the Companies Act, 1956
Section
212 - Balance Sheet of a holding company to include
certain particulars of its subsidiaries:
- Attach
a copy of audited statement of accounts.
- Attach
copies of Reports of Auditors and Directors thereon.
- Attach
a statement of the holding company's interest in the
subsidiary at the end of the financial year
- Attach
details of net aggregate amount deal with as well
as not dealt with within the company's account of
the subsidiary's profits after adjusting its losses.
- Attach
a statement containing information on change in interest
of the holding co, change in fixed assets, investments,
money borrowed or lent by it, in case the financial
years of the two do not coincide.
US GAAP
ARB-51
Consolidated Financial Statements
FAS-94 Consolidation of All Majority-owned Subsidiaries
These are
to be issued as the primary financial statements whenever
a company owns a controlling financial interest in the
voting of another company.
All investments in which a parent has a controlling
financial interest through direct or indirect ownership
of more than 50% of the voting power and reason for
not consolidating a subsidiary.
Fiscal year of parent and subsidiary may differ but
not more than 3 months.
IAS
27
Definition of Control: Power to govern the financial
and operating policies of an enterprise so as to obtain
benefits from its activities.
If a parent has one or more subsidiaries, consolidated
financial statements are required.
All subsidiaries must be included unless control is
temporary or if there are severe long term restrictions
on transfer of funds.
Required disclosure includes nature of relationship
if parent owns and does not own more than 50% of the
voting power and reason for not consolidating a subsidiary.
IPSAS
- 6
International
Public Sector Accounting Standard -6 (IPSAS-6) similar
to IAS-27.
Every controlling entity should issue consolidated financial
statements and consolidate all controlled entities,
domestic and foreign.
Regulatory and purchase powers do not constitute control
for the purpose of consolidation
|
