Page 251 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
transactions, balances and unrealised profits etc. are made in accordance with the requirements of Accounting
Standard (AS) 21, “Consolidated Financial Statements”.
2. AS 23 Equity Method for Associates:
Investments in associates are accounted for using the Equity Method as prescribed in Accounting Standard (AS)
23, “Accounting for Investments in Associates in Consolidated Financial Statements”.
3. AS 27 Proportionate consolidation method Joint Ventures:
A parent that has an interest in a jointly controlled entity, reports its interest in the consolidated financial
statements using proportionate consolidation method in accordance with Accounting Standard (AS) 27,
“Financial Reporting of Interests in Joint Ventures”.
4. Similar Procedures:
Many of the procedures appropriate for the application of equity method and the proportionate consolidation
method are similar to the consolidation procedures set out in Accounting Standard (AS) 21, “Consolidated
Financial Statements”.

Consolidation Methods under IND AS.
Ind AS 28 Consolidation Concepts for JV & Associates: Investments in associates and joint ventures are
accounted for using the Equity Method as prescribed in Indian Accounting Standard (Ind AS) 28, “Investments
in Associates and Joint Ventures”.
Ind AS 103 Consolidation Concepts for Subsidiary
• Related goodwill/ capital reserve (or gain on bargain purchase) and non-controlling interest is
determined as per Ind AS 103.
• Business combinations involving entities or businesses under common control shall be accounted for
using the pooling of interest method in accordance with Ind AS 103.
• Business Combination in Stages: In a business combination achieved in stages, the acquirer shall
remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise
the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate in
accordance with Ind AS 103.

Ind AS 110 When & How to Consolidate Subsidiary: For consolidation of subsidiaries in accordance with
the Companies (Indian Accounting Standards) Rules, 2015: the financial statements of the parent and its
subsidiaries are combined as per Ind AS 110, “Consolidated Financial Statements” on a line-by-line basis by
adding together like items of assets, liabilities, income, expenses and cash flows.
Adjustments like elimination of intra-group transactions, balances, unrealised profits and deferred tax etc. are
made in accordance with the requirements of Ind AS 110.
Ind AS 111 When & How to Consolidate JV & Associate: Interests in assets, liabilities, revenues and expenses
in a joint operation are accounted for as part of separate financial statements of the entity in accordance with
Indian Accounting Standard (Ind AS) 111, “Joint Arrangements”.
Verify Adjustments
1A. Adjustments Verification: The auditor should verify that the adjustments warranted by the relevant
accounting standards under the applicable financial reporting framework have been made wherever required
and have been properly approved by the management of the parent.
1B. Permanent vs. Current Adjustments: The preparation of consolidated financial statements gives rise to
permanent consolidation adjustments and current period consolidation adjustments.
2A. Off Balance Sheet Entities: The auditor should also pay attention to off balance sheet entities which
sometimes do not qualify for the definition of subsidiary; however, parent might have transferred risks of various
business ventures to these entities.
2B. De-facto Control: Further, de-facto control should also be considered. De facto control means an investor
with less than the majority of the voting rights has the practical ability to direct the relevant activities unilaterally.

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