01 January 2017
Section 129(3) Reads that Where a company has one or More subsidiaries, it shall, in addition to SFS, prepare a Consolidated FS and of all subsidiaries in the same form and manner as that of its on which shell also be laid before AGM of the company along with the laying of its statement under subsection 2
provided that the company shall also attached along with its financial statement a separate statement containing the salient features of the financial statement of its subsidiary for subsidiaries in such form as may be prescribed
provided for that that the central government may provide for the consolidation of accounts in such manner as may be prescribed
explanation
for the purpose of this subsection the word subsidiary include associate company and joint venture
rule number 6 of the companies accounts rules 2014 provides that the consolidation of financial statement of company shall we made in accordance with the provision of schedule III of the act and the applicable accounting standards
provided that in case of a company covered under sub section 3 of section 129 which is not required to prepare consolidated financial statements under the accounting standards it shall be sufficient sufficient if the company complies with provisions on the consolidated financial statement provided in schedule III of the act
for the provision inter alia provides that nothing in this rule shall apply in respect of consolidation of financial statement by a company having subsidiary of subsidiaries incorporated outside India only for the financial year commencing on or after 1st April 2014
Now my doubt is that
1) to ensure that what constitutes subsidiary what constitutes joint venture and what constitutes associate should I accept the veiw provided by accounting standard are you provided by companies act
2) if I have only associate company or only joint venture company do I required to prepare consolidated financial statement
02 January 2017
Answer to 1st part of your query is that Subsidiary is when you have invested more than 50%, Joint Venture is when you collaborate with another to do something jointly and the other Co. is a Associate when you invest 20% or more in the another Co. Answer to the 2nd party, is that for the purpose of Section 129, subsidiary includes Associates, this means the consolidation has to be done.There is an amendment in Rule 6 via notification dated 27th July , 2016 stating that consolidated statements need not apply in case where a Co. is a subsidiary co. and its immediate holding co. has filed the consolidated financial statement with the Registrar. Rule 8 states that certain financial information has to be given for each of the Associate. The real question is that what constitutes Consolidation in case of Assoicates. As 23 on Accounting for Assoicates states that Equity method has to be followed. Capital Reserve or Goodwill has to be computed for every change in the shareholding. Investments has to be shown at 'Carrying Value'. If you include the current year's share of profit of Associate in your Co.'s Statement of P & L and add the post-acquisition profit of Assoicate in the original cost of investment, the 'Carrying Value' of the Investment would be derived which has to be shown in the Balance Sheet. Read my Article on 'Consolidation of Associates' for further information. You can download the Annual Report of Tata Investment Corporation to see how they have consolidated for Associates
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