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Group Companies Consolidation of Balance sheet

Rahul sharma (article asistant) (33 Points)

13 September 2021

Hi experts

I have a small doubt about consolidation of Balance sheet is that tha consolidated balance sheet whether include stand alone balance sheet of subsidery of subsidery companies
I am trying to express my doubt through example

A parent company have 4 named (A,B,C,D) subsidiary and one of 4 A subsidiary companies have also 3 Subsidiary ( E,F,C)
and E also have 3 Subsidiary.

my doubt is that for the preparation of CFS of A company which companies should be included

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14 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

As per the companies act, a holding company needs to have 50% above control over a,b,c,d. Then it is a subsidiary.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

Https://cleartax.in/s/indian-subsidiary-registration This is a useful resource which will clarify your above query. TXs.

1 Like

Rahul sharma (article asistant) (33 Points)
Replied 14 September 2021

The above link only for registration of subsidery company

my doubt is only about including of stand-alone balance sheet of subsidery of subsidery companies whether we include of or make a separate note for that

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

Define group structure first, NCI. Through this you will know what kind of a business combination it is.

If a,b,c,d are subsidiaries with voting rights and control given to parent, then you will consolidate them.

If parent did not invest directly on a,b,c,d, then, consolidate subsidiary investment+parent investments in assets.

if there is no interest in a,b,c,d by parent, then there is no NCI profits to parent. You can disclose the details.

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Rahul sharma (article asistant) (33 Points)
Replied 14 September 2021

Applause for helping
can you send me any references like a section of companies act or any AS so I can understand in a better way

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

There is a small fallacy in cfs because it doesn’t mention how to account subsidiary in their separate financial statements. Eg., subsidiary equity is 100₹ and parent purchased 90₹ worth then three transactions will be like

Investment in subsidiary a/c

To Bank a/c

And how many shares you acquired will be updated in equity

Investment in subsidiary a/c

To Equity capital a/c

this will sort out the dual aspect. If you understood, subsidiary will consolidate only their standalone statements. Parent does not consolidate, consolidates statements of subsidiary. Now what is the treatment of acquiring a subsidiary in standalone statements? No text book defined that, and MCA, ICAI defines that because they don’t like students to learn consolidation with ease so that cheap people can become top level with thi knowledge.

If you look at AS 1 presentation standard, it doesn’t mention subsidiary purchase transaction but the equity method for associates is published. Cheap material and that is why there is no recognition for a ca because of alcoholics and mentally ill people writing text books.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

The second entry is not correct. Sorry. It is not for issuing/ raising capital. Sry.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

Lol I meant that is for issuing equity to raise capital. Typo.

Rahul sharma (article asistant) (33 Points)
Replied 14 September 2021

Yes, that's why everyone says in their language

1 Like

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

Thanks for your understanding, etc also meant e,f,c instead of a,b,c,d. My observations are for subsidiary’s subsidiaries.

1 Like

Rahul sharma (article asistant) (33 Points)
Replied 14 September 2021

Thanks

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 September 2021

https://www.mca.gov.in/Ministry/notification/pdf/AS_21.pdf

This is the best I can help yourself u today. Para 13 tells you the cost consolidation procedure. Assets must be added later ne by line

Rahul sharma (article asistant) (33 Points)
Replied 14 September 2021

Ok Thanks

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 02 October 2021

1) D has 3 wholly-owned subsidiary who hold 30% each in P, but D has no holding in P. How should P be consolidated?

D exercise control over more than 50% of total voting power of P, indirectly through D’s wholly-owned subsidiaries. Therefore, irrespective of whether or not A exercises any direct control over the operations of P, D would have to consolidate P directly as a subsidiary, in preparing its CFS.