Page 252 - CA Final PARAM Digital Book.

Part 1- CFS

QNO Applicability of Consolidated Financial Statement Old Course – (M17M, N18R, SM21)
435.000 TITANIUM CNO—GA.040 New Course – (SM23)
Xcess Ltd., having two subsidiaries but did not have any holding company, is a company whose securities
are not listed on any stock exchange, whether in India or outside India.
The CEO of the Xcess Ltd says that since it is an unlisted company therefore consolidation of financial
statement is not applicable. Comment on the contention of the CEO.
OR
Where a company has one or more subsidiaries, it shall, in addition to its own financial statements
prepare a consolidated financial statement of the company and of all the subsidiaries in the same form
and manner as that of its own. Explain clearly with reference of relevant Sections of the Companies Act,
2013 and The Companies (Accounts) Rules, 2014.
OR
Whether preparation of consolidated financial statements is mandatory? If yes, please elaborate on the
requirements under the statute.
OR
Please elaborate on the situations wherein the requirement related to preparation of consolidated
financial statements may not apply.
Answer Part I -- Relevant Standards & Laws
▪ Section 129(3) of the Companies Act, 2013

▪ Section 129(3) of the Companies Act, 2013
▪ Companies (Accounts) Rules, 2014,
Part II -- Requirements of Relevant Standards & Laws
➢ Section 129(3) of the Companies Act, 2013, :
Where a company has one or more subsidiaries, including associate company and joint
venture, it shall, in addition to its own financial statements prepare a consolidated financial
statement of the company and of all the subsidiaries in the same form and manner as that of
its own.
The consolidated financial statements shall also be approved by the Board of Directors before
they are signed on behalf of the Board, along with its standalone financial statements and
shall also be laid before the annual general meeting of the company along with the laying of
its standalone financial statement.
The company shall also attach along with its financial statement, a separate statement
containing the salient features of the financial statement of its subsidiary(ies) in Form AOC-1.

➢ Section 129(4) of the Companies Act, 2013,provides that:
The provisions applicable to the preparation, adoption and audit of the financial statements
of a holding company shall, mutatis mutandis, also apply to it’s the consolidated financial
statements.

➢ According to the Companies (Accounts) Rules, 2014,
The consolidation of financial statements of the company shall be made in accordance with
the provisions of Schedule III to the Act and the applicable accounting standards.
However, a company which is not required to prepare consolidated financial statements
under the Accounting Standards, it shall be sufficient if the company complies with provisions
of consolidated financial statements provided in Schedule III of the Act [refer Appendix given
at the end of Chapter 5 for Schedule III].

➢ Exemption:
However, the requirement related to preparation of consolidated financial statements shall not
apply to a company if it meets the following conditions:
it is a wholly owned subsidiary, or is a partially-owned subsidiary of another company and all
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