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Consolidation of financial statements

Ravi Gupta (Company Secretary) (42 Points)

16 January 2017

Dear Professionals,

Can any one guide me on the following query:

There are three Companies A, B and C

C is an associate company of Company B and Company B is associate Company of Company A, as per the defination of associate of Companies act 2013 by virtue of significant influence, now in this case accounts of Company C will be consolidated with Accounts of Company B, then whether the consolidated acounts of Company B(Standalone of B and C) is consolidated with standalonle accounts of Company A or Standalone accounts of Company B is consolidated with Standalone accounts of Company A?

Please reply on urgent basis.

Regards

Ravi Gupta

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3 Replies

Sandeep Garg (Consolidation and IndAS Application) (1056 Points)
Replied 17 January 2017

For consolidation at entity A level, consolidated accounts of entity B shall be used.

Further, in case of associates, equity method is applicable not line by line consolidation.

Further, if an entity has only associate and no subsidiary, then consolidation is not required.

Thanks

Ravi Gupta (Company Secretary) (42 Points)
Replied 21 January 2017

Thanks sir for your reply!!

But as per theprovisions of section 129(3) of the CA 2013 and consolidation as per AS 23, FS of associate Company have to be consolidated with Holding Companies according to equity method. Can you please share any notification/circular in this regard??

Regards

Ravi Gupta

Sandeep Garg (Consolidation and IndAS Application) (1056 Points)
Replied 23 January 2017

Right...AS 21 and AS 23 sets the guidelines for method of consolidation. As suggested by the name of AS 23 itself - "Accounting for Investments in Associates in Consolidated Financial Statements", it says an associate shall be consolidated in "consolidated financials statements (CFS). It means the company should be preparing the CFS shall consolidate Associate also as per equity method. Practically, we do the consolidation if and only if a company has at least one subsidiary.

Hope this clarifies.

Thanks