As per Sub Section 3 of Section 129 Companies Act, 2013 –
“Where a company has one or more subsidiaries or associate companies, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2):
Provided that the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries and associate company or companies in such form as may be prescribed”(Effective from May 7th, 2018)
Further as per Sub Section 6 of the Section 2 of the Companies Act, 2013
“associate company“, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
From the above Discussion it is pertinent to mentioned that the followings companies are required to prepare Consolidated Financial Statement (As per Companies Act).
1. Holding Company
2. Parent Company(Which has its Associate Company)
3. Joint Venture Company
As per Indian Accounting Standards (IAS)
1. Indian Accounting Standard (IAS) 21 deals with Consolidated Financial Statement.
A parent which presents consolidated financial statements should consolidate all subsidiaries, domestic as well as foreign, other than those referred to in Next Para. 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.
A subsidiary should be excluded from consolidation when:
1. control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future; or
2. it operates under severe long-term restrictions which significantly impair its ability to transfer funds to the parent.
According to the Indian Accounting Standards following types of the Companies required to prepare consolidated financial statement by complying with the following Accounting Standards
|S.No.||Type of entity||AS Applicable|
|1.||Holding Companies||AS 21-Consolidated Financial Statement|
|2.||Parent Company of Associate Company||AS 23-Accounting for Associates in Consolidated Financial Statements|
|3.||Joint Venture||AS 27-Financial Reporting of Interests in Joint Ventures|