Page 261 - CA Final PARAM Digital Book.

the report of approving authority in the case of accounting standards and in the financial
statements in case of Ind AS. For such events, the following shall be disclosed
The nature of the event; and
An estimate of its financial effect or a statement that such an estimate cannot be made
adjustments for the effects of significant transactions or other events that occur between
the date of the components balance sheet and not already recognised in its financial
statements and the date of the auditor’s report on the group’s consolidated financial
statements when the financial statements of the component to be used for consolidation
are not drawn up to the same balance sheet date as that of the parent;
(Foreign Component)-In case of a foreign component, adjustments to convert a
component’s audited financial statements prepared under the component’s local GAAP to
the GAAP under which the consolidated financial statements are prepared.
(Minority Interest) - determination of movement in equity attributable to the minorities
interest/no controlling interest since the date of acquisition of the subsidiary.
(Deferred Tax)-adjustments of deferred tax on account of temporary differences arising
out of elimination of profit and losses resulting from intra group transactions and
undistributed profits of the component in case of consolidated financial statements
prepared under In AS.

QNO Harmonising Accounting Policies Old Course – (M18E)
439.010 UNIQUE
H Co. Ltd. is a holding company with two subsidiaries R Co. Ltd., and S Co. Ltd., The H Co. Ltd., adopts
straight line method of depreciation for its assets whereas S Co. Ltd., follows written down value or
diminishing value method. Though R Co. Ltd. follows straight line method of depreciation, it does not

give effect to component accounting of depreciation in respect of high value assets. While consolidating
the financials of the R Co. Ltd., and S Co. Ltd., with those of H Co. Ltd., determine the possible issues that

you have to ensure for compliance in the light of above facts
Answer ➢ When the Component(s) Auditor Reports on Financial Statements under an Accounting
Framework is Different than that of the Parent:

A component may alternatively prepare financial statements on the basis of the parent’s
accounting policies, as outlined in the group accounting manual.
Group accounting manual would normally contain all accounting policies, including
relevant disclosure requirements, which are consistent with the requirements of the
financial reporting framework under which the group’s consolidated financial statements
are prepared. The local component auditor can then audit and issue an audit report on
the components financial statements prepared in accordance with “group accounting
policies”.
When applying this approach of, the principal/parent auditors should perform procedures
necessary to determine compliance of the group accounting policies with the GAAP
applicable to the parent’s financial statements.

➢ Ind-AS 8
It may be noted that change in the selection of the method of depreciation is an
accounting estimate and not an accounting policy as per Ind-AS 8.
Accordingly, the entity should select the method that most closely reflects the expected
pattern of consumption of the future economic benefits embodied in the asset.
That method should be applied consistently from period to period unless there is a change
in the expected pattern of consumption of those future economic benefits in separate
financial statements as well as consolidated financial statements.

Therefore, there can be different methods for calculation of depreciation for its assets, if their
expected pattern of consumption is different. The method once selected in the stand-alone
financial statements of the subsidiary should not be changed while preparing the consolidated
financial statements.

Case Discussion
➢ In the given case, assets of R Co. Ltd. (subsidiary company) is depreciated using straight line
method, assets of S Co. Ltd. (subsidiary company) are depreciated using written down value

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