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TMI BlogConsolidated Financial StatementsX X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 consolidated financial statements, other Accounting Standards also apply in the same manner as they apply to the separate financial statements. 4. This Standard does not deal with: (a) methods of accounting for amalgamations and their effects on consolidation, including goodwill arising on amalgamation (see AS 14, Accounting for Amalgamations); (b) accounting for investments in associates (at present governed by AS 13, Accounting for Investments 23 ); and (c) accounting for investments in joint ventures (at present governed by AS 13, Accounting for Investments 24 ). 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) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of materiality is applied in the context of consolidated financial statements. (c) Additional statutory information disclosed in separate financial statements of the subsidiary and/or a parent having no bearing on the true and fair view of the consolidated financial statements need not be disclosed in the consolidated financial statements. 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 need is served by providing the users - (a) separate financial statements of the parent; and (b) consolidated financial statements, which present financial information about the group as that of a single enterprise without regard to the legal boundaries of the separate Scope of Consolidated Financial Statements 9. A parent which presents consolidated financial statements should consolidate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any of the following conditions is satisfied: (a) a person cannot be appointed as member of the governing body without the exercise in his favour by that other enterprise of such a power as aforesaid; or (b) a position held by him in that other enterprise; or (c) the member of the governing body is nominated by that other enterprise. Explanation: It is possible that an enterprise is controlled by two enterprises one controls by virtue of ownership of majority of the voting power of that enterprise and other controls, by virtue of an agreement or otherwise, the composition of the board of directors so as to obtain economic benefit from its activities. In such a rare situation, when an enterprise is controlled by two enterprises as per the definition of , 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 the requirements of this Standard. 11. A subsidiary should be excluded from consolidation when: (a) control is intended to be temporary because the subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 statements present financial information about the group as that of a single enterprise, the following steps should be taken: (a) the cost to the parent of its investment in each subsidiary and the parent s portion of equity of each subsidiary, at the date on which investment in each subsidiary is made, should be eliminated; (b) any excess of the cost to the parent of its investment in a subsidiary over the parent s portion of equity of the subsidiary, at the date on which investment in the subsidiary 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 the subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for consolidation. Adjustments are made to these financial statements for the effects of significant transactions or other events that occur between the date of such financial statements and the date of investment in the subsidiary. 15. If an enterprise makes two or more investments in another enterprise at different dates and eventually obtains control of the other enterprise, the consolidated 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, may be considered as the date of investment. 16. Intragroup balances and intragroup transactions and resulting unrealised profits should be eliminated in full. Unrealised losses resulting from intragroup transactions should also be eliminated unless cost cannot be recovered. 17. Intra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 parentsubsidiary relationship ceases to exist are included in the consolidated statement of profit and loss until the date of cessation of the relationship. The difference between the proceeds from the disposal of investment in a subsidiary and the carrying amount of its assets less liabilities as of the date of disposal is recognised in the consolidated statement of profit and loss as the profit or loss on the disposal of the investment in the subsidiary. In order to ensure the comparability of the financial statements from one accounting period to the next, supplementary 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Provisions 26 30. On the first occasion that consolidated financial statements are presented, comparative figures for the previous period need not be presented. In all subsequent years full comparative figures for the previous period should be presented in the consolidated financial statements. ************* NOTES:- 22 It is clarified that AS 21 is mandatory if an enterprise presents consolidated financial statements. In other words, the accounting standard does not mandate an enterprise to present consolidated financial statements but, if the enterprise presents consolidated financial statements for complying with the requirements of any statute or otherwise, it should prepare and present consolidated financial statements in accordance with AS 21. 23 Accounting Standard (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements, specifies the requirements relating to accounting for investments in associates in Consolidated Financial Statements. 24 Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures, specifies the requirements relating to accounting for investments in joint v ..... 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