Consolidation

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Ajay S.Yadav (Querist)
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11 February 2017 DEAR EXPERTS

There are two company. Company A and Company B. Company A holds 99.99 % of the shares of Company B. During the F.Y. 2015-16 ( A.Y. 2016-17) the net-worth of company B is eroded ( i.e. gets negative) . Now I want to prepare consolidated Balance sheet and profit and loss account, kindly advise me how to show the loss of Company B while preparing Consolidated Balance Sheet Company A & B. what will be the accounting treatment and how to show it as per SH-III of Companies Act, 2013 ?

CA Amrita Chattopadhyay

CA Amrita Chattopadhyay

(Expert)
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13 February 2017 During consolidation, we need to add the line by line items. The investment of Company A will be adjusted with the net worth of Company B. Thus, the loss incurred will be shown as the resultant figure which shall be capital reserve in the books of Company A.