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Videos - consolidated financial statements

CA Gopal Somani (Consultant) (2057 Points)

06 April 2017

Hi Everyone !

Please find below the link to youtube Videos for Consolidated Financial Statements for CA FInal. It will be useful for CS and CMA students as well.

https://youtu.be/QsLjnNs27LA?list=PLjemDd6cjImDTZ60vCrRejTI6u93vysp-

This covers topics like -

1. Basic Concept

2. Calculation of Capital Profit and Revenue Profit

3. Calculation of Cost of Control and Minority Interest

4. Treatment of Dividend and Bonus Share

5. Preparation of Consolidated Balance sheet

6. Adjustment of Intra Group Transactions

I'll posting more videos on remaining topics like Chain holding, Acquision at different dates, consolided P/L etc.

Please check. I hope it will be useful for you.

Please let me know if you have any queries.

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7 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 06 April 2017

when companies act 1956 was prevelant we consolidate when a company holds 51% of share capital in another company and in situations when one company controls the composition of board of directors in financial and operational decisions of another company

Is there any other situations where parent has to consolidate its subsidary after companies act 2013 came into force

can you eloborate with examples so as layman like me can understand

Thanks in advance

CA Gopal Somani (Consultant) (2057 Points)
Replied 06 April 2017

FACTORS FOR DETERMINING ‘HOLDING COMPANY’ & ‘SUBSIDIARY COMPANY’:

Fundamentally, there are two mutually exclusive factors to be considered in determining whether one company is a subsidiary of another.

(i) The first is control over composition of the Board of Directors of the company by the other company. This factor remains unchanged under the CA, 2013. Thus, where the company has the right which can be exercised by it at its discretion to appoint or remove all or a majority of the directors of the other company.

(ii) The second factor is where a company exercises or controls more than one-half of the ‘total share capital’ either on its own or together with one or more of its subsidiary companies.

Under the Companies Act, 1956 the exercise or control was with respect to more than 50% in the nominal value its equity share capital. Thus, in determining ‘more than 50%’control through votes, only the paid up equity capital was relevant for determining whether one company was a subsidiary of another.

MEANING OF ‘TOTAL SHARE CAPITAL’:

Under the CA, 2013 however, what is relevant is ‘exercise’ or ‘control’ of more than one-half of the ‘total share capital’ which is defined under the rules as: Aggregate of (i) Paid up equity share capital and (ii) Paid up convertible preference shares capital. Therefore, where a company has issued and paid up convertible preference shares, such preference share capital amount will have to be aggregated with paid up equity share capital for determining whether the company would be a subsidiary of another company.

Moreover a company shall be deemed to be a subsidiary company of the holding company if one or more of the subsidiary companies controls such company. In that case Such company will be deemed as subsidiary of Holding company. Example A holds 60% share of B, B holds 60 % shares of C. So, in this case C will also be considered as subsidiary of A.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 07 April 2017

lot of questions on this

should unlisted companies require to consolidate its financial statements if the above two conditions are fulfilled after companies act 2013

should foreign subsidaries also need to be consolidated by both listed and unlisted companies ?

CA Gopal Somani (Consultant) (2057 Points)
Replied 08 April 2017

Unlisted Companies are also required to consolidate its financial Statements. Exemption is provided only when it fulfills all below 3 Conditions -

- Company is neither Listed or nor in process of Listing.

- Its ultimate or any intermediate holding is filing consolidated financial statement.

- It is Wholly Owned Subsidiary or partly owned subsidiary if such non consolidation is informed to share holders (including Preference share holders) and no objection received from them.

The above rule doen not grant exemption to Foreign Subsidiary (Wholly owned or Partly owend). So, for them consolidation is required.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 10 April 2017

IS Proposed dividend is not considered as a liability instead it is stated in Notes on Accounts is this amendment in AS-4 has become effective? if yes has this treatment undergone any change while doing consolidated financial statements