CONSOLIDATION OF FINANCIAL STATEMENTS
Section 129 of the Companies Act, 2013 ('the Act') provides that the financial statements of the Company shall give true and fair view of state of affairs of the Company, comply with applicable accounting standards and shall be made as per Schedule III of the Act.
Sub section 3 of section 129 contains the provisions for consolidation of financial statements which states that:
i. If a Company has one or more subsidiaries then it shall in addition to financial statement of its own also be required to prepare the consolidated financial statement of the Company and of all its subsidiaries.
ii. The consolidated financial statement shall be made in the same form and manner as of its own and shall also be laid before the annual general meeting of the Company.
iii. It also mandates the Company to attach with its financial statements a separate statement containing the salient features of the financial statements of its subsidiaries in FORM AOC-1.
For the purpose of sub section 3 of section 129 of the Act the Subsidiary shall include Associate Company and Joint Venture Company.
An Associate Company shall have the meaning as defined in Section 2 (6) of the Act which states that associate company means a company in which other company has significant influence but which is not subsidiary company of the company and includes joint venture company.
Significant influence means control of atleast 20% of total paid up share capital or business decision under an agreement.
As per rule 6 of The Companies (Accounts) Rules, 2014 the Company having subsidiary Company shall be exempted from the requirement of preparing consolidated financial statement if it meets the following conditions:
- It is a wholly owned subsidiary or partially owned subsidiary and its other members have been intimated by the Company in writing about the non presenting of consolidated financial statement and they have no objection about such non presenting;
- It is a company whose securities are not listed or not in the process of listing on any stock exchange whether in India or outside India;
- Its ultimate holding or any intermediate holding company files consolidated financial statement with ROC.
PENALTY FOR CONTRAVENTION:
If the provision of this section is violated by Company then its MD, WTD, CFO or any other person authorized by board to comply with section and in absence of any of above, all the Directors of the Company shall be punishable with
- Imprisonment which may extend to 1 yr or
- With fine which shall not be less than 50,000/- and may be extend to 5 lakh or
- With both
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