Regarding consolidated financial satements

Consolidated Financial Statements is used to present financial statements of a parent and its subsidiary(s) as a single economic entity. In other words the holding company and its subsidiary(s) are treated as one entity for the preparation of these consolidated financial statements. Consolidated profit/loss account and consolidated balance sheet are prepared for disclosing the total profit/loss of the group and total assets and liabilities of the group. Consolidated financial statements provide a comprehensive overview of a company's operations. Without them, investors would not have an idea of how well an enterprise "as a whole" is doing.

Now; my question is; If a company owns less than 20% of another company's stock, it's not actually holding the subsidiary it's just a share-holder company & even if a company owns more than 20% but less than 50%, in that case also it's not actually holding the subsidiary it's just a share-holder company (for example -  like a person buying some share of a company).

Does consolidated accounts should be prepared in this case also ?

For the purpose of consolidation, one company has to subsidiary of another company. As per the definition as per AS -21 The control is defined by having voting power either directly or indirectly by another enterprise or control the composition of Board of Directors. 

In your case going by the voting rights, it does not fall under the parent subsidiary relation. If the other condition with regard to influencing the Board of Director is not fulfilled, in such case consolidated financial statement need not be prepared

Originally posted by : CA Amrita Chattopadhyay
	For the purpose of consolidation, one company has to subsidiary of another company. As per the definition as per AS -21 The control is defined by having voting power either directly or indirectly by another enterprise or control the composition of Board of Directors.  In your case going by the voting rights, it does not fall under the parent subsidiary relation. If the other condition with regard to influencing the Board of Director is not fulfilled, in such case consolidated financial statement need not be prepared

Thank-You for replying.

I hope the same clause will be applicable when an investing private limited company, become a partner in a partnership-firm by investing money in the partnership-firm BUT doesn't possess the majority-share [let the private limited company come in ranking as 2nd-partner "in terms" of investment in the partnership-firm].

I hope in this case also - consolidated financial statement need not be prepared ??

Company and partnership firm are two distinct entity. It is not possible to consolidate two separate entities

Originally posted by : CA Amrita Chattopadhyay
	Company and partnership firm are two distinct entity. It is not possible to consolidate two separate entities

Thank-You for replying,

I asked similar question [i.e., "consolidated accounts OR non consolidated accounts" when pvt. ltd. company becomes partner in partnership firm] & i got the following answer -

If the company is having more than 50% control in the partnership, the partnership firm needs to be consolidated.
For consolidation, we need to check whether the firm is a material subsidiary or immaterial subsidiary depending on capital invested.
For material subsidiary, the partnership needs to have proper books of accounts and should follow the same accounting standards applicable to the holding company or during consolidation we have to convert different accounting policy to the accounting policy of the holding company; the books of accounts are also required to be audited by CA and we as holding company statutory auditor can rely on the audit report of another CA after completing the requirements prescribed in the standards of auditing
(ex. checking comptency of CA, sample check, integrity of CA, relevance of work for us,etc.)

For immaterial subsidiary, audit report is not required and we can consolidate using Management information.

Even if there is no control, we need to test the investments for diminution and provide for losses thereby reflecting fair view of the Investments value in the standalone financial statements.

Could you kindly throw some more light on the above statement ??