Explore the key aspects of IND AS 110 and IFRS 10 Consolidated Financial Statements with a summary incorporating changes as per the Companies (Indian Accounting Standards) Amendment Rules 2023. Understand the differences between Ind AS 110 and IFRS 10, the objective of the standards, scope, and definitions such as control, consolidated financial statements, parent, subsidiary, and non-controlling interest. Delve into the accounting requirements, consolidation procedures, and examples of consolidated balance sheets. Stay informed about the latest updates to ensure compliance with the evolving accounting standards.
Summary of Indian Accounting Standard (Ind AS) 110, IFRS 10 Consolidated Financial Statements by incorporating Changes as per Companies (Indian Accounting Standards) Amendment Rules 2023.
1. The Accounting Standards related with Consolidated Financial Statements
A. Ind As -110.
B. IFRS 10
2. Differences between Ind AS 110 and IFRS 10
| Ind AS-110 | IFRS 10 |
| 1. Relevant terms are Statement of profit and loss and balance sheet | 1. Relevant terms are Statement of Comprehensive Income and Statement of Financial Position |
| 2.Appendix C OF IFRS 10 dealing with effective date, transition and withdrawal of other IFRSs has not been included in Ind AS 10 | —— |
3. No major differences between Ind AS 110and IFRS 10 except the above.
4. Objective
The objective of this standard is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.
Meeting the objective
To meet the objective in paragraph 1, this Standard
(a) Requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
(b) Defines the principle of control, and establishes control as the basis for consolidation;
(c) Sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee;
(d) Sets out the accounting requirements for the preparation of consolidated financial statements; and
(e) Defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity. This Standard does not deal with the accounting requirements for business combinations and their effect on consolidation, including goodwill arising on a business combination.
5. Scope
An entity that is a parent shall present consolidated financial statements. This Standard applies to all entities, except as follows:
(a) A parent need not present consolidated financial statements if it meets all the following conditions:
(i) It is a wholly‑owned subsidiary or is a partially‑owned subsidiary of another entity and all its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements;
(ii) Its debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over‑the‑counter market, including local and regional markets);
(iii) It did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; and
(iv).Its ultimate or any intermediate parent produces financial statements that are available for public use and comply with Ind ASs, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with this Ind AS
This Ind AS does not apply to post-employment benefit plans or other long-term employee benefit plans to which Ind AS 19 Employee Benefits applies.
A parent that is an investment entity shall not present consolidated financial statements if it is required, in accordance with paragraph 31 of this Ind AS, to measure all of its subsidiaries at fair value through profit or loss.
6. Definitions
A. Control
An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee.
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Thus, an investor controls an investee if and only if the investor has all the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of the investor’s returns.
Companies registered under the Companies Act, the entities are basis for consolidation i.e, either it should be subsidiary.
B. Consolidated financial statements
The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.
C. Parent
An entity that controls one or more entities.
D. Subsidiary
An entity that is controlled by another entity.
E. Non-controlling interest.
Equity in a subsidiary not attributable, directly or indirectly, to a parent.
Here, Equity means Equity share Capital, Preference Share capital, Preference dividend, pre-acquisition profit, post- acquisition profit and share in the increase in value of fixed assets
7. Accounting Requirements.
I. A parent shall prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances
Consolidation of an investee shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee.
Non-controlling interests.
A parent shall present non-controlling interests in the consolidated Balance sheet within equity, separately from the equity of the owners of the parent.
Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (ie transactions with owners in their capacity as owners).
II. Summary of Consolidation of procedures.
Following financial statement is to be prepared
A. Consolidated Financial statements of Group
The financial statements of a parent and its subsidiaries are combined on a line-by-line basis by adding together like items of assets, liabilities, equity, income and expenses. Then the following steps are taken:
a. Offset (eliminate) the carrying amount of the parent’s investment in each subsidiary (asset)
b. Recognizing and measuring goodwill or a gain from a bargain purchase (As per Ind AS 103).
The acquirer shall recognize goodwill as of the acquisition date measured as the excess of
(a) Over (b) below:
(a) The aggregate of:
(i) The consideration transferred measured in accordance with this IndAS, which generally requires acquisition‑date fair value;
(ii) The amount of any non‑controlling interest in the acquiree measured in accordance with this Ind AS; and
(iii) In a business combination achieved in stages, the acquisition‑date fair value of the acquirer’s previously held equity interest in the acquiree.
(b) The net of the acquisition‑date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this Ind AS.
c. Gain from Bargain Purchase. (As per Ind AS 103)
In extremely rare circumstances an acquirer will make a gain from bargain purchase in a business combination. This happens when the net assets acquired is greater than the total consideration.
d. Good will or Gain from bargain Purchase should be shown in the balance sheet.
e. Non -Controlling Interest with respect to subsidiaries should be included in the balance sheet.
f. Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognized in assets, such as inventory and fixed assets, are eliminated in full). While preparing the consolidated balance sheet the mutual owings are not required to be shown. The examples of Mutual owings are-
1.Trade Debtors and Trade Creditors
2. Bills Receivable and Bills payable
3. Loans and advances.
g. Unrealized losses resulting from intra-group transactions should also be eliminated unless cost can be recovered.
7 . Example of Consolidated Balance sheet
| Particulars | Note No | Amount |
| Assets | ||
| Non-Current Assets | ||
| Property, Plant and Equipment | ||
| Capital Work-in-Progress | ||
| Goodwill | ||
| Other Intangible Assets | ||
| Intangible Assets Under Development | ||
| Financial Assets | ||
| Investments | ||
| Loans | ||
| Deferred Tax Assets (Net) | ||
| Other Non-Current Assets | ||
| Total Non-Current Assets | ||
| Current Assets | ||
| Inventories | ||
| Financial Assets | ||
| Investments | ||
| Trade Receivables | ||
| Cash and Cash Equivalents | ||
| Loans | ||
| Other Financial Assets | ||
| Total Current Assets | ||
| Assets Held for Sale. | ||
| Total Assets |
–
| Equity and Liabilities | ||
| Equity | ||
| Equity Share Capital | ||
| Other Equity | ||
| Non-Controlling Interest | ||
| Liabilities | ||
| Non-Current Liabilities | ||
| Financial Liabilities | ||
| Borrowings | ||
| Other Financial Liabilities | ||
| Deferred Payment Liabilities | ||
| Provisions | ||
| Deferred Tax Liabilities (Net) | ||
| Provisions | ||
| Deferred Tax Liabilities (Net) | ||
| Other Non-Current Liabilities | ||
| Total Non-Current Liabilities | ||
| Financial Liabilities | ||
| Trade Payables | ||
| Other Financial Liabilities | ||
| Other Current Liabilities | ||
| Provisions | ||
| Other Non-Current Liabilities | ||
| Total Current Liabilities | ||
| Liabilities directly associated with Assets Held for Sale | ||
| Total Liabilities | ||
| Total Equity and Liabilities | ||
| Significant Accounting Policies See accompanying Notes to the Financial Statements |
(Republished with amendments)
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