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Consolidated Financial Statements [w.e.f 30-3-2016]

AS - 21 - Rules - B. Accounting Standard (AS) - Companies (Accounting Standard) Rules, 2006 - AS - 21 - [W.e.f. 30-3-2016 - See Notification no. 364E dated 30-3-2016] Accounting Standard (AS) 21 Consolidated Financial Statements5 (This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the General Instruc .....

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gle economic entity to show the economic resources controlled by the group, the obligations of the group and results the group achieves with its resources. Scope 1. This Standard should be applied in the preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent. 2. This Standard should also be applied in accounting for investments in subsidiaries in the separate financial statements of a parent. 3. In the preparation of consolidate .....

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verned by AS 13, Accounting for Investments7 ). Definitions 5. For the purpose of this Standard, the following terms are used with the meanings specified: 5.1 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 benef .....

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the net results of operations and of the net assets of a subsidiary attributable to interests which are not owned, directly or indirectly through subsidiary(ies), by the parent. 6. Consolidated financial statements normally include consolidated balance sheet, consolidated statement of profit and loss, and notes, other statements and explanatory material that form an integral part thereof. Consolidated cash flow statement is presented in case a parent presents its own cash flow statement. The co .....

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form an integral part thereof: (a) Notes which are necessary for presenting a true and fair view of the consolidated financial statements are included in the consolidated financial statements as an integral part thereof. (b) Only the notes involving items which are material need to be disclosed. Materiality for this purpose is assessed in relation to the information contained in consolidated financial statements. In view of this, it is possible that certain notes which are disclosed in separate .....

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of such information in the case of companies is attached to the Standard. Presentation of Consolidated Financial Statements 7. A parent which presents consolidated financial statements should present these statements in addition to its separate financial statements. 8. Users of the financial statements of a parent are usually concerned with, and need to be informed about, the financial position and results of operations of not only the enterprise itself but also of the group as a whole. This ne .....

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Where an enterprise does not have a subsidiary but has an associate and/or a joint venture such an enterprise should also prepare consolidated financial statements in accordance with Accounting Standard (AS) 23, Accounting for Associates in Consolidated Financial Statements, and Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures respectively. 10. The consolidated financial statements are prepared on the basis of financial statements of parent and all enterprises that .....

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ctivities. An enterprise may control the composition of the governing bodies of entities such as gratuity trust, provident fund trust etc. Since the objective of control over such entities is not to obtain economic benefits from their activities, these are not considered for the purpose of preparation of consolidated financial statements. For the purpose of this Standard, an enterprise is considered to control the composition of: (i) the board of directors of a company, if it has the power, with .....

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the director is nominated by that enterprise or a subsidiary thereof. (ii) the governing body of an enterprise that is not a company, if it has the power, without the consent or the concurrence of any other person, to appoint or remove all or a majority of members of the governing body of that other enterprise. An enterprise is deemed to have the power to appoint a member, if any of the following conditions is satisfied: (a) a person cannot be appointed as member of the governing body without th .....

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trols, by virtue of an agreement or otherwise, the composition of the board of directors so as to obtain economic benefits from its activities. In such a rare situation, when an enterprise is controlled by two enterprises as per the definition of control , the first mentioned enterprise will be considered as subsidiary of both the controlling enterprises within the meaning of this Standard and, therefore, both the enterprises need to consolidate the financial statements of that enterprise as per .....

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ing Standard (AS) 13, Accounting for Investments. The reasons for not consolidating a subsidiary should be disclosed in the consolidated financial statements. Explanation: (a) Where an enterprise owns majority of voting power by virtue of ownership of the shares of another enterprise and all the shares are held as stock-in-trade and are acquired and held exclusively with a view to their subsequent disposal in the near future, the control by the first mentioned enterprise is considered to be temp .....

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nt is considered at the time of acquisition of the investment. Accordingly, if the relevant investment is acquired without an intention to its subsequent disposal in near future, and subsequently, it is decided to dispose off the investment, such an investment is not excluded from consolidation, until the investment is actually disposed off. Conversely, if the relevant investment is acquired with an intention to its subsequent disposal in near future, but, due to some valid reasons, it could not .....

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activities of subsidiaries. For example, the disclosures required by Accounting Standard (AS) 17, Segment Reporting, help to explain the significance of different business activities within the group. Consolidation Procedures 13. In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries should be combined on a line by line basis by adding together like items of assets, liabilities, income and expenses. In order that the consolidated financial sta .....

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ary is made, should be described as goodwill to be recognised as an asset in the consolidated financial statements; (c) when the cost to the parent of its investment in a subsidiary is less than the parent s portion of equity of the subsidiary, at the date on which investment in the subsidiary is made, the difference should be treated as a capital reserve in the consolidated financial statements; (d) minority interests in the net income of consolidated subsidiaries for the reporting period shoul .....

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iary is made; and (ii) the minorities share of movements in equity since the date the parent-subsidiary relationship came in existence. Where the carrying amount of the investment in the subsidiary is different from its cost, the carrying amount is considered for the purpose of above computations. Explanation: (a) The tax expense (comprising current tax and deferred tax) to be shown in the consolidated financial statements should be the aggregate of the amounts of tax expense appearing in the se .....

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eet are inclusive of the parent s share in the post-acquisition reserves of a subsidiary. 14. The parent s portion of equity in a subsidiary, at the date on which investment is made, is determined on the basis of information contained in the financial statements of the subsidiary as on the date of investment. However, if the financial statements of a subsidiary, as on the date of investment, are not available and if it is impracticable to draw the financial statements of the subsidiary as on tha .....

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d financial statements are presented only from the date on which holding-subsidiary relationship comes in existence. If two or more investments are made over a period of time, the equity of the subsidiary at the date of investment, for the purposes of paragraph 13 above, is generally determined on a step-by-step basis; however, if small investments are made over a period of time and then an investment is made that results in control, the date of the latest investment, as a practicable measure, m .....

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s, such as inventory and fixed assets, are eliminated in full. Unrealised losses resulting from intragroup transactions that are deducted in arriving at the carrying amount of assets are also eliminated unless cost cannot be recovered. 18. The financial statements used in the consolidation should be drawn up to the same reporting date. If it is not practicable to draw up the financial statements of one or more subsidiaries to such date and, accordingly, those financial statements are drawn up to .....

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sidiary often prepares, for consolidation purposes, statements as at the same date as that of the parent. When it is impracticable to do this, financial statements drawn up to different reporting dates may be used provided the difference in reporting dates is not more than six months. The consistency principle requires that the length of the reporting periods and any difference in the reporting dates should be the same from period to period. 20. Consolidated financial statements should be prepar .....

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tatements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements when they are used in preparing the consolidated financial statements. 22. The results of operations of a subsidiary are included in the consolidated financial statements as from the date on which parent-subsidiary relationship came in existence. The results of operations of a subsidiary with which parent-subsidiary relationship ceases to exist are included in the con .....

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plementary information is often provided about the effect of the acquisition and disposal of subsidiaries on the financial position at the reporting date and the results for the reporting period and on the corresponding amounts for the preceding period. 23. An investment in an enterprise should be accounted for in accordance with Accounting Standard (AS) 13, Accounting for Investments, from the date that the enterprise ceases to be a subsidiary and does not become an associate8. 24. The carrying .....

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r losses applicable to the minority, are adjusted against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to the majority interest until the minority s share of losses previously absorbed by the majority has been recovered. 27. If a subsidiary has outstanding cumulative preference shares which are held outside the group, the parent compute .....

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ould be made: (a) in consolidated financial statements a list of all subsidiaries including the name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held; (b) in consolidated financial statements, where applicable: (i) the nature of the relationship between the parent and a subsidiary, if the parent does not own, directly or indirectly through subsidiaries, more than one-half of the voting power of the subsidiary; (ii) the ef .....

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not be presented. In all subsequent years full comparative figures for the previous period should be presented in the consolidated financial statements. Illustration Note: This illustration does not form part of the Accounting Standard. Its purpose is to assist in clarifying the meaning of the Accounting Standard. In the case of companies, the information such as the following given in the notes to the separate financial statements of the parent and/or the subsidiary, need not be included in th .....

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ment or under Current Assets as stock-in-trade) separately classifying trade investments and other investments, showing the names of the bodies corporate (indicating separately the names of the bodies corporate under the same management) in whose shares or debentures, investments have been made (including all investments, whether existing or not, made subsequent to the date as at which the previous balance sheet was made out) and the nature and extent of the investment so made in each such body .....

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ng companies, quantitative information in regard to the licensed capacity (where licence is in force); the installed capacity; and the actual production. (viii) Value of imports calculated on C.I.F. basis by the company during the financial year in respect of : (a) raw materials; (b) components and spare parts; (c) capital goods. (ix) Expenditure in foreign currency during the financial year on account of royalty, know-how, professional, consultation fees, interest, and other matters. (x) Value .....

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ated. (xii) Earnings in foreign exchange classified under the following heads, namely: (a) export of goods calculated on F.O.B. basis; (b) royalty, know-how, professional and consultation fees; (c) interest and dividend; (d) other income, indicating the nature thereof. [Footnotes as per Notification no. 364E dated 30-3-2016] * All paragraphs of this Standard that deal with contingencies are applicable only to the extent not covered by other Accounting Standards prescribed by the Central Governme .....

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ipment. 2 Shares, debentures and other securities held as stock-in-trade (i.e., for sale in the ordinary course of business) are not investments as defined in this Standard. However, the manner in which they are accounted for and disclosed in the financial statements is quite similar to that applicable in respect of current investments. Accordingly, the provisions of this Standard, to the extent that they relate to current investments, are also applicable to shares, debentures and other securiti .....

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