• Consolidation to be done on a line by line basis by adding like items of assets, liabilities,income and expenses which involves:i) Elimination of cost to the parent of the investment in the subsidiary and the parent’sportion of equity of the subsidiary at the date of investment. The difference to be treated asgoodwill/capital reserve, as the case may be.ii) Minority interest in the net income to be adjusted against income of the group.iii) Minority interest in net assets to be shown separately as a liability.iv) Intra-group balances and intra-group transactions and resulting unrealised profits shouldbe eliminated in full. Unrealised losses should also be eliminated unless cost cannot berecovered.v) The tax expense (current tax and deferred tax) of the parent and its subsidiaries to beaggregated and it is not required to recompute the tax expense in context of consolidatedinformation (ASI -26).vi) The parent’s share in the post-acquisition reserves of a subsidiary is not required to bedisclosed separately in the consolidated balance sheet. (ASI-28).• Where two or more investments are made in a subsidiary, equity of the subsidiary to begenerally determined on a step by step basis.• Financial statements used in consolidation should be drawn up to the same reportingdate. If reporting dates are different, adjustments for the effects of significanttransactions/events between the two date to be made• Consolidation should be prepared using same accounting policies. If the accountingpolicies followed are different, the fact should be disclosed together with proportion of suchitems.• In the year in which parent subsidiary relationship ceases to exist, consolidation of P & Laccounts to be made up to date of cessation.• Disclosure is to be of all subsidiaries giving name, country of incorporation or residence,proportion of ownership and voting power held if different.• Also nature of relationship between parent and subsidiary if parent does not own morethan one half of voting power, effect of the acquisition and disposal of subsidiaries on thefinancial position, names of the subsidiaries whose reporting dates are different than that of the parent.
Leave a Comment