AS 21
CONSOLIDATED FINANCIAL
STATEMENTS
(issued in 2001)
Objective:
To
formulate principles and procedures for preparation and
presentation of consolidated financial statements
Scope:
This standard is
applicable to the following:
a.
Group of enterprises under the control of a parent.
b.
Investments in subsidiaries
it
does not deal with
a.
Amalgamations
b.
Investments in associates
c.
Investments in joint ventures
Definitions:
Control:
|
|
a. Ownership, directly or indirectly, of
more than one half of the
voting power.
b. Control of composition
of board of directors of a company
Subsidiary: it includes
both domestic and foreign companies.
Consolidated financial statement contains the following:
a.
Consolidated Balance sheet
b.
Consolidated P & L statement
c.
Notes, Explanatory material, additional statements
The
consolidated financial statements are compiled on the basis of
financial statements of PARENT and all enterprises that are
controlled by the parent.
However,
the parent shall not include its subsidiaries when
a.
Control on that subsidiary is intended for short term.
b.
Subsidiary operates under severe long term restrictions.
Procedure:
1. The
financial statements of the parent and its subsidiaries should
be combined on a
ONE-TO-ONE
BASIS by grouping together the like items of assets,
liabilities, income and expenses.
2. The
holding company should eliminate its cost of investment in each
of its subsidiaries
3. If
cost of investment > Equity share holding
-----> GOODWILL
4. If cost of investment <
Equity share holding
----->
CAPITAL RESERVE
5. Minority
interests in the net income should be identified and adjusted
against the income of the group in order to arrive at the net
income attributable to the owners of the parent; and
Disclosure requirements:
The
consolidated financial statements should disclose the following
wherever applicable:
a. The
nature of the
relationship between the parent and a subsidiary.
b. The
impact of the acquisition
and disposal of
subsidiaries on the financial position.
c. The
names of the subsidiary
of which reporting date
is different from that of the parent and the difference in
reporting dates.
d.
Minority interests
should be presented in the consolidated balance sheet separately
from liabilities and the equity of the parent's shareholders.
e.
Consolidated financial statements should be prepared using
uniform accounting
policies. In case such uniform accounting policies cannot be
incorporated in preparation of consolidated financial statements
the same shall be disclosed.
|