Page 256 - CA Final PARAM Digital Book.

of Sun Ltd While preparing consolidated financial statements for the year ended 31st March, 2017,
accountant of Moon Ltd did not consider financial statements of Sun Ltd for consolidation. Comment
Answer Part I -- Relevant Standards & Laws
▪ Section 129(3) of the Companies Act, 2013

▪ Companies (Accounts) Rules, 2014,
▪ IND-AS 110
Part II -- Requirements of Relevant Standards & Laws

➢ Companies Act, 2013
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.

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 on consolidated financial statements provided in Schedule III of the Act

➢ Accounting Standard
As per Ind AS 110 “Consolidated Financial Statements”, states
There is no such exemption for ‘temporary control’ or “for operation under severe long-
term funds transfer restrictions” and consolidation is mandatory for Ind AS compliant
financial statement in this case.
Part III – Case Discussion
➢ In the given case, Moon Ltd acquired 65% shares of Sun Ltd on 28th October 2016 on 25th April
2017they sold 25% shares of Sun Ltd. On 31 of March control existed.
st
Part IV – Conclusion
➢ Here as per In AS 110 “Consolidated Financial Statements “if MOON Ltd. is required to
prepare its financial statements under Ind AS, it shall have to prepare Consolidated Financial
Statements in accordance with Ind AS 110 as exemption for ‘temporary control’, or “for operation
under severe long -term funds transfer restrictions” is not available under Ind AS 110.
➢ Paragraph 20 of Ind AS 110 states that “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”.
Author’s Note

• Answer of this question has been redrafted as per IND-AS
• Refer author’s note of QNO 436.300.

QNO Temporary Holding (Investment Company) Old Course – (N18E, SM21, N21E, N22R, N23R)
436.300 TITANIUM CNO— GA.040
H its Financial Statements in accordance with Ind AS. The Company obtains funds from various investors
and commits its performance for fair return and capital appreciation to its investors. During the year
under audit, it had been observed that the Company had invested 25 % in SI Ltd., 50% in S2 Ltd. and 60%
in S3 Ltd. of the respective share capitals of the Investee Companies. When checking the investment
schedule of the Company, an issue cropped as to whether there would arise any need X to consolidate
accounts of any such investee companies with those of H Limited in accordance with section 129(3) of
the Companies Act, 2013 which contains no exclusion from consolidation. Analyse the issues involved

and give your opinion.
OR
Jambu & Sudharma Investments Ltd. is a company having paid up share capital of ₹ 1 crore, it has a
subsidiary, Investors Fund Management Ltd. Major business of Jambu & Sudharma Investments Ltd. is to
pool money from investors on a collective basis and invest this money in various funds. This company
pooled ₹ 12 crore from a number of clients, which represent the Company's shareholders. While auditing
books of accounts of Jambu & Sudharma Investments Ltd. CA Vardhman observed that whole amount of

www.auditguru.in PARAM 13.5 | P a g e