susidiary company

Save Share

This query is : Resolved

sanjay gupta (Querist)

12 August 2009 Hello,
we have a subsidiary compnay in free trade zone at UAE. what are the requirements for annual accounts and audit of subsidiary company as per UAE and its incorporation in indian parent compnay as per indian company law.

sanjay gupta

sanjay gupta (Querist)

22 September 2009 any body can reply clearly.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

26 July 2025 Great question! Here’s a clear overview addressing your points about the subsidiary company in the UAE Free Trade Zone and its accounting & audit requirements both in UAE and India.

---

### 1. **Annual Accounts and Audit of Subsidiary Company in UAE Free Trade Zone**

* **UAE Free Trade Zone Companies** are governed by the rules of the specific Free Zone Authority under which they are incorporated (e.g., JAFZA, DMCC, RAKEZ).
* **Annual Accounts:**

* Most Free Zones require companies to maintain proper accounting records.
* Financial statements usually need to be prepared annually.
* **Audit Requirement:**

* Some Free Zones **mandate annual audits**, while others may not.
* For example, **JAFZA requires audited financial statements**, but some Free Zones like DMCC may not if the company is small.
* **Filing:**

* Audited financial statements are generally submitted to the Free Zone Authority.
* The exact deadlines vary by Free Zone.

**Summary for UAE Subsidiary:**

* Check the specific Free Zone rules where your subsidiary is incorporated.
* Maintain books of accounts as per International Financial Reporting Standards (IFRS) or local GAAP (often IFRS).
* Get accounts audited if mandated.

---

### 2. **Incorporation of UAE Subsidiary in Indian Parent Company’s Books**

* Under **Indian Companies Act, 2013** and **Accounting Standards**, the Indian parent company must **consolidate the financial statements** of its subsidiary.
* Key points:

* **Consolidation:** Indian parent company must prepare consolidated financial statements as per **Indian Accounting Standard (Ind AS) 110** or **Accounting Standard (AS) 21**, whichever applicable.
* **Investment Accounting:** The investment in subsidiary is shown under the head “Investment in Subsidiary” in the parent’s standalone accounts.
* **Foreign Subsidiary:**

* The subsidiary’s accounts prepared in UAE (likely in USD or AED) must be translated into Indian Rupees (INR) for consolidation using prescribed exchange rates.
* Exchange differences are adjusted as per Ind AS 21/AS 11.
* **Auditor’s Role:**

* The parent company’s auditor will rely on the subsidiary’s audited accounts for consolidation.
* Sometimes, the parent auditor requests audit certificates or reliance letters from subsidiary auditors.

---

### Summary Table

| Aspect | UAE Subsidiary | Indian Parent Company |
| --------------------------- | -------------------------------------------- | ---------------------------------------------- |
| Accounting Standards | IFRS or Free Zone specified standards | Ind AS / AS (Indian GAAP) |
| Audit Requirement | Depends on Free Zone Authority | Audit mandatory for parent and consolidated FS |
| Financial Statements Filing | To Free Zone Authority annually | Consolidation with parent company accounts |
| Currency Conversion | AED/USD to INR (as per accounting standards) | Necessary for consolidation |
| Compliance | Free Zone Regulations | Companies Act, 2013; Ind AS 110 / AS 21 |

---

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now