PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AS PER THE COMPANIES ACT :
The Companies Act 1956 Act does not require preparation of consolidated financial statements (‘CFS’). However,
listed entities are required to prepare CFS (as per SEBI regulations). The Companies Act 2013 has made preparation of consolidated accounts mandatory for companies having one or more subsidiaries or associates
or joint ventures. According to sub section 3 of the section 129 of the Companies Act, 2013, where a company
has one or more subsidiaries or associates or joint ventures, it shall, in addition to its financial statements for the
financial year, prepare a consolidated financial statement of the company and of all the subsidiaries or associates
or joint ventures in the same form and manner as that of its own which shall also be laid before the annual
general meeting of the company along with the laying of its financial statement.
The requirement to prepare CFS is largely consistent with internationally accepted practices. However, internationally, such requirements apply only to listed companies; and unlisted intermediate entities are generally exempted. The existing Indian and international accounting practices do not require preparation of CFS when the Company has investments only in associates and joint ventures (no subsidiaries).
According to the rules, the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries or associates or joint venture in the Form 9.1.
The Consolidation of financial statements of the company shall be made in accordance with the Accounting Standards, subject however, to the requirement that if under such Accounting Standards, consolidation is not required for the reason that the company has its immediate parent outside India, then such companies will also be required to prepare Consolidated Financial Statements in the manner and format as specified under Schedule III to the Act.