Menu
Accountiong on consolidation AS 21
Hi,
Can any body throw light on the following.
Whether subsidiary or majority board controlled company's accounts are to be
consolidated with the holding co's accounts from the date of parent subsidiary
relationship exists or from the statrting period of accouting period of subsidiary company irrespective of the date of becoming subsidiary co. If it is to be consolidated from the date of subsidiary relationship starts, how to consolidate.
1. The relevant sales and cost of sales and other exps -- how to conoslidate.
2. Balance sheet is with reference to closing date say March.31 in which case
it may include items prior to subsidiary relations comes>
What will be the accounting traetment for sales and exps prior to the period
parent - subsidiary relationship.
Could some one clarify?
Thanks
Mouli
Replies (4)
1. A subsidiary's fin. statements have to be consolidated with the holding company's.
2. The date of acquisition is relevant only for determining the portion of the subsidiary's profits and reserves to be classified as pre-acquisition and post-acquisition profits and reserves.
3. Consolidation will be made as on 31st march, hence the balance sheet items will be added on a 1-on-1 basis. here there is no question of pre and post acquisition as the balance sheet represents the fin position as on a date.
I feel you dont have any idea of AS 21...so i suggest you read it thoroughly first. You would be able to understand better.
2. The date of acquisition is relevant only for determining the portion of the subsidiary's profits and reserves to be classified as pre-acquisition and post-acquisition profits and reserves.
3. Consolidation will be made as on 31st march, hence the balance sheet items will be added on a 1-on-1 basis. here there is no question of pre and post acquisition as the balance sheet represents the fin position as on a date.
I feel you dont have any idea of AS 21...so i suggest you read it thoroughly first. You would be able to understand better.
hi
SC ur approach is also not appropriate.
Presenting CFS is not compulsary.
Even Sec 212 of companies act does not reuire CFS to be presented.
Therefore presenting CFS is sole intention of the company.
As per AS-21, If CFS is presented, then provision of this AS should be followed.
As per para 13 Financial statements should be combined on a line by line basis by adding together like item of assets, liabilities, Income, expenditure.
it does not only cover b/s items but also p&L items.
As per sec 213, gap of 6 months between statements is allowed, there for no condition of consolidation on 31st march.
Para 18-19, adjustment are required to be made for difference in period, and the length of period should be consistent but no separate statement of subsidiary is required on consolidation date.
consolidation will be made from the starting of accounting period, and not from acquisition date.
SC ur approach is also not appropriate.
Presenting CFS is not compulsary.
Even Sec 212 of companies act does not reuire CFS to be presented.
Therefore presenting CFS is sole intention of the company.
As per AS-21, If CFS is presented, then provision of this AS should be followed.
As per para 13 Financial statements should be combined on a line by line basis by adding together like item of assets, liabilities, Income, expenditure.
it does not only cover b/s items but also p&L items.
As per sec 213, gap of 6 months between statements is allowed, there for no condition of consolidation on 31st march.
Para 18-19, adjustment are required to be made for difference in period, and the length of period should be consistent but no separate statement of subsidiary is required on consolidation date.
consolidation will be made from the starting of accounting period, and not from acquisition date.
Hi
The first step in consolidation is to ascertain the Reserves balance as of the date of establishment of holding subsidiary relationship.
For the purposes, the only way is draw up the accounts(Pl/BS) till date for the intermediate part of the year.
The intervening period shall the period between the last reported date and the date of the establishment of the relationship.
the profit loss balance upto the date of the establishment of relationship shall be considered for the ascertainment of goodwill/capital reserves on account of consolidation.
For example, say the effective date of establishment of relationship is 31/6/2006, profit/loss balance upto 31/6/2006(ie P/L balance on 31/3/2006+Profit/loss earned during 1/4/2006-31/3/2006) shall be adjusted(to the extent of the parents' holding) against the cost of the investment thereby resulting into goodwill/capital reserves. Thus for all the earnings upto 31/6/2006 is adjusted against the cost and shall appear as goodwill/capital reserves in the consolidated financial statements.
Even if the balance sheet contains the assets and liabilities as of 31/3, there is minorities interest which allocates the shareholders funds between the holding company's share in the subsidiary and share of the minorities. ascertainment of goodwill/capital reserves reflect the shareholders fund(to the extent of the parent co share) before the establishment of the relationship. Subsequently, addition to reserves will be consolidated with the parent co balances on line by line basis.
The first step in consolidation is to ascertain the Reserves balance as of the date of establishment of holding subsidiary relationship.
For the purposes, the only way is draw up the accounts(Pl/BS) till date for the intermediate part of the year.
The intervening period shall the period between the last reported date and the date of the establishment of the relationship.
the profit loss balance upto the date of the establishment of relationship shall be considered for the ascertainment of goodwill/capital reserves on account of consolidation.
For example, say the effective date of establishment of relationship is 31/6/2006, profit/loss balance upto 31/6/2006(ie P/L balance on 31/3/2006+Profit/loss earned during 1/4/2006-31/3/2006) shall be adjusted(to the extent of the parents' holding) against the cost of the investment thereby resulting into goodwill/capital reserves. Thus for all the earnings upto 31/6/2006 is adjusted against the cost and shall appear as goodwill/capital reserves in the consolidated financial statements.
Even if the balance sheet contains the assets and liabilities as of 31/3, there is minorities interest which allocates the shareholders funds between the holding company's share in the subsidiary and share of the minorities. ascertainment of goodwill/capital reserves reflect the shareholders fund(to the extent of the parent co share) before the establishment of the relationship. Subsequently, addition to reserves will be consolidated with the parent co balances on line by line basis.
[quote=417]hi
SC ur approach is also not appropriate.
Presenting CFS is not compulsary.
Even Sec 212 of companies act does not reuire CFS to be presented.
Therefore presenting CFS is sole intention of the company.
As per AS-21, If CFS is presented, then provision of this AS should be followed.
As per para 13 Financial statements should be combined on a line by line basis by adding together like item of assets, liabilities, Income, expenditure.
it does not only cover b/s items but also p&L items.
As per sec 213, gap of 6 months between statements is allowed, there for no condition of consolidation on 31st march.
Para 18-19, adjustment are required to be made for difference in period, and the length of period should be consistent but no separate statement of subsidiary is required on consolidation date.
consolidation will be made from the starting of accounting period, and not from acquisition date.
[vk bansal i like your clarity/quote]
SC ur approach is also not appropriate.
Presenting CFS is not compulsary.
Even Sec 212 of companies act does not reuire CFS to be presented.
Therefore presenting CFS is sole intention of the company.
As per AS-21, If CFS is presented, then provision of this AS should be followed.
As per para 13 Financial statements should be combined on a line by line basis by adding together like item of assets, liabilities, Income, expenditure.
it does not only cover b/s items but also p&L items.
As per sec 213, gap of 6 months between statements is allowed, there for no condition of consolidation on 31st march.
Para 18-19, adjustment are required to be made for difference in period, and the length of period should be consistent but no separate statement of subsidiary is required on consolidation date.
consolidation will be made from the starting of accounting period, and not from acquisition date.
[vk bansal i like your clarity/quote]
Recent Threads
- RNOR status and exemption on RFC account interest
- Upload error for ITR 2 filing after validation
- CCI Forum gets fresh Look ! Share your views
- Presumptive taxation 44AD BLOCK PERIOD
- FORM 27Q FILING
- TDS for Advance Maintenance
- GST on product purchased at MRP
- TDS on Joining Bonus
- How to complete form10E Table details for the year
- How to submit ITR for old F&O losses
Related Threads
CAclubindia
