CFS INCLUDING MAURITIUS SDS

The comment in your statutory auditor's note suggests that the accounting policies of the Mauritian subsidiary have been adjusted to align with those of the Indian holding company for the purpose of consolidating the financial statements. This practice is common when consolidating financial statements under Indian Accounting Standards (Ind AS) or even local GAAP, to ensure uniformity in reporting and comparability within the group.

Key Points to Address:

1. Relevance of Accounting Standards in Consolidation:

   • Even though the Indian parent and the Mauritian subsidiary are following their respective local accounting standards (Indian AS and Mauritian AS), when preparing consolidated financial statements, the accounting policies must be uniform.
   • This is required under Ind AS 110 (Consolidated Financial Statements), which states that the financial statements of subsidiaries must be prepared using the same accounting policies as those of the parent company for consolidation purposes.

2. Why the Auditor Made This Comment:

   • If there are differences between the Indian AS and Mauritian AS, the subsidiary's accounting policies may have been adjusted (through restatements or disclosures) to align with the parent company's policies. This ensures consistency and comparability in the consolidated financial statements.
   • Examples of such adjustments might include differences in depreciation methods, revenue recognition, or treatment of leases.

3. Applicability When Not Using IFRS:

   • Even when not following IFRS, local standards often require consolidation practices to align accounting policies within the group. For Indian companies, this aligns with Indian AS requirements.
   • Mauritian GAAP (or IFRS if the subsidiary uses it) does not govern consolidation in the Indian parent's books; instead, Indian GAAP or Ind AS governs the group’s consolidated financial statements.

4. Steps You Can Take:

   • Clarify with your auditor whether such adjustments were indeed necessary and, if so, provide specifics on which policies were adjusted and why.
   • Verify if any material differences in accounting policies existed that required reconciliation or modification during consolidation.
   • Ensure that disclosures in the consolidated financial statements explain these adjustments transparently.

Conclusion:

The comment is appropriate if adjustments were made to harmonize accounting policies for consolidation purposes. However, if no such adjustments were actually required because the two standards are compatible, you can seek clarification from your statutory auditor to avoid potential misrepresentation.