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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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..... ant influence and which is neither a subsidiary nor a joint venture30 of the investor. 3.2 Significant influence is the power to participate in the financial and/ or operating policy decisions of the investee but not control over those policies. 3.3 Control: (a) the ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting power of an enterprise; or (b) control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise so as to obtain economic benefits from its activities. 3.4 A subsidiary is an enterprise that is controlled by another enterprise (known as the parent). 3.5 A parent is an enterprise that has one or more subsidiaries. 3.6 A group is a parent and all its subsidiaries. 3.7 Consolidated financial statements are the financial statements of a group presented as those of a single enterprise. 3.8 The equity method is a method of accounting whereby the investment is initially recorded at cost, identifying any goodwill/capital reserve arising at the time of acquisition. The carrying amount of the investment is adjusted thereafter for the po .....

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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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..... e statement of profit and loss. Such changes include those arising from the revaluation of fixed assets and investments, from foreign exchange translation differences and from the adjustment of differences arising on amalgamations. Explanations: (a) Adjustments to the carrying amount of investment in an investee arising from changes in the investee s equity that have not been included in the statement of profit and loss of the investee are directly made in the carrying amount of investment without routing it through the consolidated statement of profit and loss. The corresponding debit/ credit is made in the relevant head of the equity interest in the consolidated balance sheet. For example, in case the adjustment arises because of revaluation of fixed assets by the investee, apart from adjusting the carrying amount of investment to the extent of proportionate share of the investor in the revalued amount, the corresponding amount of revaluation reserve is shown in the consolidated balance sheet. (b) In case an associate has made a provision for proposed dividend in its financial statements, the investor s share of the results of operations of the associate is computed without takin .....

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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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..... nding the scope of its consolidated financial statements to include its share of results of such an associate and so provides an analysis of earnings and investment from which more useful ratios can be calculated. As a result, application of the equity method in consolidated financial statements provides more informative reporting of the net assets and net income of the investor. 9. An investor should discontinue the use of the equity method from the date that: (a) it ceases to have significant influence in an associate but retains, either in whole or in part, its investment; or (b) the use of the equity method is no longer appropriate because the associate operates under severe longterm restrictions that significantly impair its ability to transfer funds to the investor. From the date of discontinuing the use of the equity method, investments in such associates should be accounted for in accordance with Accounting Standard (AS) 13, Accounting for Investments. For this purpose, the carrying amount of the investment at that date should be regarded as cost thereafter. Application of the Equity Method 10. Many of the procedures appropriate for the application of the equity method are .....

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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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..... ike transactions and events in similar circumstances. In case an associate uses accounting policies other than those adopted for the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to the associate s financial statements when they are used by the investor in applying the equity method. If it is not practicable to do so, that fact is disclosed along with a brief description of the differences between the accounting policies. 17. If an associate has outstanding cumulative preference shares held outside the group, the investor computes its share of profits or losses after adjusting for the preference dividends whether or not the dividends have been declared. 18. If, under the equity method, an investor s share of losses of an associate equals or exceeds the carrying amount of the investment, the investor ordinarily discontinues recognising its share of further losses and the investment is reported at nil value. Additional losses are provided for to the extent that the investor has incurred obligations or made payments on behalf of the associate to satisfy obligations of the associate that the investor has gu .....

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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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..... the differences in the accounting policies. Transitional Provisions32 26. On the first occasion when investment in an associate is accounted for in consolidated financial statements in accordance with this Standard the carrying amount of investment in the associate should be brought to the amount that would have resulted had the equity method of accounting been followed as per this Standard since the acquisition of the associate. The corresponding adjustment in this regard should be made in the retained earnings in the consolidated financial statements. ************* NOTES:- 28 It is clarified that AS 23 is mandatory if an enterprise presents consolidated financial statements. In other words, if an enterprise presents consolidated financial statements, it should account for investments in associates in the consolidated financial statements in accordance with AS 23. 29 Accounting Standard (AS) 13, Accounting for Investments, is applicable for accounting for investments in associates in the separate financial statements of an investor. 30 Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures, defines the term t venture and specifies the requirements relating .....

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AS - 23 - Accounting for Investments in Associates in Consolidated Financial Statements - Companies (Accounting Standards) Rules, 2021

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