Challenging case study for consolidation any one can answer?

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akash gupta (Querist)

04 November 2012 a holding company has 2 subsidiary companies S1 & S2. S1 holds preference share of S2 which has been purchased during the year. the financial position at the end of the year is as follow
comany S1 :- Investment 115000
Comapny S2 :Preference share 100000 and securities premium rs.15000

means preference shae has been issued with premium of Rs.15000

Please explain the treatment of the following on consolidation.
and one more point whether preference dividend has to be provide for as per AS 21

murtuza munim

murtuza munim (Expert)

06 November 2012 Dear Akash,
The percentage of holding in the subsidiary is not menitoned and hence is assumed to be 100%.
The treatment on consolidation is as follows,
1. The amount of investment of S1 shall be netted off from preference shares and the securities premium account, hence the net impact shall be that the amount of investments shall be the amount appearing in the consolidated accounts.
2. The preference dividend shall be eliminated since the preference shares are held within the group. However the Dividend Distribution Tax on the same shall be shown as a tax expense, since the same is an outflow outside the group

akash gupta

akash gupta (Querist)

08 November 2012 i am 100% agree with you ...thanks sir

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