Requirement to prepare Consolidated financial statement

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2 Points Joined June 2025

Our Company A which has invested 1 crore in company B which is in 50:50 joint venture with company C. Also our company A has 4 Directors and company C has 5 Directors in the joint venture company of B & C, should  we as Company A prepare consolidated financial statement as per Ind AS? If yes, do we have to prepare CFS under equity method based on significant influence (voting power of Directors) being > 20%? 

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On 21 June 2025 at 18:24 Report
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9434 Points Joined December 2011

Consolidated Financial Statements (CFS) under Ind AS As Company A has invested ₹1 crore in Company B, a 50:50 joint venture with Company

C, you need to determine if consolidation is required.

Control and Significant Influence - *Control*: To determine if Company A should prepare Consolidated Financial Statements (CFS), you need to assess control over Company B. Control is typically determined by: - 

Ownership of more than 50% of the voting power. - Ability to direct the financial and operating policies. - *Significant Influence*: If control is not established, you need to assess significant influence. Significant influence is typically presumed when an investor holds 20% or more of the voting power. 

Joint Venture and Consolidation Given the 50:50 joint venture and the composition of the board of directors (4 from Company A and 5 from Company C), it appears that Company A might not have control over Company B. However, Company A might have significant influence.

 Equity Method If Company A has significant influence but not control, it would typically account for its investment in Company B using the equity method. Under the equity method: -

*Initial Investment*: Recorded at cost. - *Subsequent Measurement*: Adjusted for the investor's share of the investee's net assets and profits/losses. Preparation of CFS Based on the information provided, it seems unlikely that Company A would need to prepare CFS for Company B.

 Instead, Company A would likely account for its investment in Company B using the equity method.

Consult a Professional To ensure compliance with Ind AS and determine the appropriate accounting treatment, consider consulting a chartered accountant or financial expert who can assess the specific circumstances of your joint venture and provide guidance on preparing financial statements.

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On 23 June 2025 at 10:41


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